Baton-wielding policemen fired warning shots and pepper spray after the clash started early today.
Footage showed protesters levering up bricks from pavements in the busy Mongkok district, charging police lines with homemade shields and setting rubbish on fire in the middle of the road.
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Police said nearly 90 officers were injured by broken glass or hard objects, while dozens of protesters were also hurt in the Chinese New Year clash.
Police fired at least two warning shots in the air, multiple news outlets reported, a very rare occurrence in the semi-autonomous southern Chinese city.
Police Commissioner Stephen Lo defended the officer who fired the warning revolver shots, saying rioters were continuously attacking his already injured colleague.
"With no alternative, his police colleague used his firearm in accordance with the use of force principles to prevent his fellow colleague from being further attacked," Lo said, adding there would be a full investigation.
Police said 54 protesters aged between 15-70 were arrested for assaulting police, resisting arrest and disorderly conduct in a public place, among others offences.
"We will consider charging the arrested persons for participating in a riot," Lo said. This carries a sentence of up to 10 years in prison.
Social media has dubbed the street battles that erupted after officials tried to move illegal food hawkers as the "fishball revolution".
Demonstrators, including members of radical "localist" groups which stress Hong Kong's separate identity from the mainland, tried to defend the hawkers whom they say add to the festive atmosphere.
Reports said one of those arrested was Edward Leung, a "localist" candidate for an upcoming by-election on February 28.
Hong Kong leader Leung Chun-ying said the government "strongly condemns such violent acts".
"There was a riot in Mongkok in the early hours of today," the chief executive told reporters. "A few hundred mobs attacked police officers and media.
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