Four persons were injured and nearly 100 have been rounded up for their alleged involvemnet in the violence, police said.
The incident took place last night when a large number of people belonging to a particular community were returning to their homes after taking part in Dussehra festivities.
Suddenly, people from another community allegedly pelted stones on them at some places in the city almost at the same time, following which members of both the communities came face to face, police said.
"The situation is under control now," Dube told PTI.
"We have rounded up nearly 100 people after they indulged in stone-pelting and arson at five places in the city causing injuries to four persons," Khargone SP Amit Singh said.
Khargone is about 300 km from state capital Bhopal.
Additional security forces have been requisitioned from neighbouring district and deployed in the city to control the situation.
Police is reviewing CCTV footages to identify those who indulged in the violence and has launched a drive to nab them, the SP said.
The injured persons were admitted in the district hospital, the Collector said.
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