Hundreds of residents of East Timor's seaside capital have fled their homes after four people died in protests by soldiers and their supporters, prompting the president to urge them to return to their homes.

The cash-strapped government dismissed more than 500 soldiers earlier this month, prompting a series of protests joined by groups the government says have broader motives. Friday's demonstration turned violent, as protesters burned cars and threw rocks at police and officers fired into the crowd.

Police originally said two people died in the clashes, but on Saturday said two more bodies had been found. All the dead were protesters, police said. The Friday riot and sounds of gunfire in Dili overnight prompted more than 1,300 people to flee their homes, a Reuters photographer said.

He said more than 1,000 were camped out in the grounds of a Catholic cathedral and around 300 on a field at the U.S. embassy.

"The situation is under control now. I ask people to return home," East Timor President Xanana Gusmao told the refugees.

Friday's protest had been planned as the last in a series by the sacked soldiers. They say their dismissal was unfair and have demanded a quick government investigation.

Meanwhile, Australian Foreign Minister Alexander Downer on Saturday ruled out further Australian involvement.

"There is no plan for Australia to become any more involved and the East Timorese haven't asked us to become involved," he said. "... They feel confident they can handle the situation on their own."