Protesters were also reportedly killed in clashes with security forces in Libya and Yemen.
"They are killing us!" one man told Reuters as police, firing tear gas, bird shot and percussion grenades, moved on Pearl Square around 3 a.m. local time on Thursday. The police dispersed about 2,000 people, including women and children who had been camped out in the square for the past three days. Using knives, the police cut through the tents set up by demonstrators.
The Interior Ministry said in a statement posted on Twitter that "security forces evacuated protesters from Pearl roundabout."
Eyewitnesses said the raids early Thursday were unprovoked and came without warning.
Bahrain Interior Minister Sheikh Rashid bin Abdullah al-Khalifa apologized for the deaths and ordered an investigation.
Bahrain is an absolute monarchy, and while a relatively small Persian Gulf state, it has considerable strategic value to the United States. It is the base of the U.S. Fifth Fleet and home to 2,300 military personnel. The fleet protects oil moving from the Persian Gulf to the West as well as the interests of the United States in a 20-nation area that includes vital waterways like the Suez Canal and the Strait of Hormuz.
The fleet also acts as a counterbalance to Iran, which lies just across the Gulf of Oman.
Bahrain's Saudi-allied royal family, long aware of simmering discontent, might have learned from watching similar movements topple veteran leaders in Tunisia and Egypt, and moved to head off any challenge to their rule before the protests could gain momentum, wrote the Guardian.
There have been international calls for King Hamad bin Issa al-Khalifa to listen to the concerns of the mainly Shiite demonstrators, who say they are discriminated against by the Sunni elite, whose numbers have sharply increased in recent years through selective immigration from neighboring Sunni Arab states.
About half of the island kingdom's 1.3 million people are Bahraini, while the rest are foreign workers. Shiites make up 70 percent of the population.
In 2001, voters overwhelmingly approved a national charter to lead the way toward democratic changes. But a year later, the king imposed a constitution by decree that Shiite leaders say has diluted the rights in the charter and blocked them from achieving a majority in the parliament.
Many of the protesters in Pearl Square were openly calling for the king's ouster, while others demanded the immediate resignation of longtime Bahraini Prime Minister Sheik Khalifa bin Salman Al Khalifa.
The bloody Pearl Square crackdown prompted a Bahrain foreign ministry official and a popular human rights activist to resign from their government posts. Nazar Al-Bahrnah, minister of state for foreign affairs, and Abdullah Al Durazi, who had been tasked with overseeing a national reconciliation committee, both stepped down in protest at the government's actions.
Bahrain's "King Hamad will never regain credibility after attacking peaceful protesters as they slept. Blood is forever on his hands," the New York Times' Nick Kristof tweeted from Manama.
Maryam Al-Khawaja from the Bahrain Center for Human Rights, who saw the raid in Pearl Square, told ABC: "People were just trying to get away wherever they could. There were women running around trying to carry their children to get away and as we were running people were screaming that there are women and children still inside the tents at Pearl Roundabout. So there were young men who were going back and trying to get them out."
Doctors and nurses were reportedly also turning against the government after the defense ministry ordered hospitals not to dispatch ambulances to treat the injured.
Here's a New York Times photo Gallery showing graphic images of the crackdown in Pearl Square.
Britain has warned its citizens to avoid traveling around the island.
Khawaja said many foreigners were among the ranks of riot police.
"Most of the riot police that are used by the Ministry of Interior are newly naturalized people brought from other countries, like Yemen, Baluchis from Pakistan, Syria, Jordan and they're brought and recruited into the riot police and used against peaceful protesters like us," she told ABC.
"These are brought specifically, given citizenship on the day they arrive and put in the riot police, given government housing and paid by the government, while there are Bahrainis who have to wait 20, 30 years to receive government houses, who are unemployed and who live in really poor conditions."
ABC reported from Libya, meanwhile, that protesters calling for longtime leader Col. Muammar Gaddafi to step down clashed with security forces in the town of Bayda, near Benghazi, Libya's second largest city.
It quoted protesters as saying they had burned down a police station and that activists were planning major anti-government protests throughout the country against Gaddafi's four-decade-long rule.
There was little sign early on Thursday, however, that a social media campaign to get Libyans onto the streets for a "Day of Rage" had had much of a response in the tightly controlled North African nation.
Recent days have also seen trouble on the streets of Yemen, Iraq and Iran.
In Yemen, protests continued for the sixth straight day. Police shot and killed two protesters in Aden.
There were also clashes in the capital Sanaa, where students clashed with protesters who were loyal to the President Ali Abdullah Saleh.