BURMESE police have fired rubber bullets to disperse crowds of Buddhists and Muslims facing off in the streets of Mandalay, the country's second-largest city.

Burma has been racked by violence between the groups since June 2012.

More than 200 people have been killed and at least 140,000 displaced.

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Most of the victims have been from the minority Muslim population.

Police deployed more than 600 officers after a crowd of about 300 Buddhists including 30 monks began throwing stones near a tea shop owned by a Muslim man.

One policeman, three Buddhists and one Muslim were injured by stones in the incident.

Police said they fired three rubber bullets in an attempt to control the crowd which dispersed after monks helped convince people to leave.

A witness who lives in the mostly Muslim neighbourhood said a Buddhist mob had gathered after rumours spread that the Muslim owner of a tea shop had raped a Buddhist woman.