The shooting occurred in the eastern city of Jalalabad, where demonstrators smashed the windows of cars and shops and threw stones at a passing convoy of American soldiers. Mobs also broke into UN compounds and burned two cars. No UN staff were reported hurt.
"They are very angry and are spread over all over the city," intelligence chief Sardar Shah told The Associated Press. "There are police, army and Americans shooting into the air. ... We've tried to get control but I think it is impossible."
At one point, officials said students chanting "Death to America" and "Death to Bush" threw stones at a group of American military vehicles. US troops had fired into the air before quickly leaving the area, he said.
A US military spokeswoman in Kabul had no information on the incident.
An Associated Press Television News cameraman said the crowds grew larger and wilder after the firing and that the streets were void of traffic. Mobs pelted a government office and the local television station with rocks and tore down posters of President Hamid Karzai.
Deputy health chief Mohammed Ayub Shinwari said two protesters were killed and 40 injured. Many were being treated in Jalalabad hospital for bullet wounds, he said.
Students held similar but peaceful protests
The demonstrations began Tuesday, when protesters burned an effigy of President Bush over a report in Newsweek magazine that interrogators at Guantanamo Bay placed Qurans on toilets in order to rattle suspects, and in at least one case "flushed a holy book down the toilet."
In Washington, the State Department on Tuesday described the reported desecration as "reprehensible."
"Obviously, the destruction of any kind of holy book, whether it's a Bible or a Quran or any other document like that, is something that's reprehensible and not in keeping with US policies and practices," State Department spokesman Tom Casey said.
Casey said the allegations are "certainly serious and it would be important to have them be looked into."
Witnesses said students also demanded the release of all prisoners from Guantanamo, and that "American troops don't stay in Afghanistan forever" --tricky issues likely to be discussed when Karzai meets Bush in Washington later this month.
The government of neighboring Pakistan like Afghanistan, a conservative Muslim nation and close ally in Washington's war on terrorism -- on Saturday said it was "deeply dismayed" over the magazine report and called for an inquiry.
The United States is holding about 520 people at Guantanamo Bay, many of them al-Qaida and Taliban suspects captured in Pakistan and Afghanistan following the Sept. 11 attacks in America.