The violence is the latest twist in a conflict pitting Bangkok's middle class and royalist elite against the mostly poor, rural supporters of Yingluck and her brother, Thaksin Shinawatra, a populist ex-premier who was ousted in a military coup in 2006 and lives in self-imposed exile.
Yingluck told a news conference police would not use force but the national security chief said rubber bullets were being used as protesters threatened to advance on Yingluck's office, the focal point of the demonstrations since the weekend.
A hospital official later said two protesters had been wounded by gunfire.
The number of protesters was well down on the 30,000 at various sites on Sunday, but hard-core elements broke through concrete barriers set up around Government House, Yingluck's office in the heart of Bangkok. After using canister upon canister of tear gas to repel them on Sunday, police stepped up their response yesterday.
"We are alternating between the use of water cannons, tear gas and rubber bullets," said Paradorn Pattanathabutr, head of the National Security Council.
"Rubber bullets are being used in one area only and that is the bridge near Government House."