Iraqi security forces opened fire on protesters who defied a curfew in Baghdad and exchanged fire with gunmen in a southern city, killing at least 28 people have been killed in the three days of protest and over 600 wounded.

Demonstrations began over unemployment and poor services but have escalated into calls for a change of government and pose one of the worst security challenges in years.

They appear to be independent of any political party and seemingly took the security forces by surprise.

"The bullets do not scare us. They do not scare Iraqis. This will all come down over their heads," said one protester in the capital.At least 4,000 protesters gathered in Baghdad's Tayaran Square and attempted to march onto the central Tahrir Square only to be met with open fire and heavy tear gas.

Police used live ammunition in the Zaafaraniya district of Baghdad, where a protester was shot dead, and there were protests in the northwestern Shula district.

Police said protesters had fired at them in the town of Rifaen near the southern city of Nassiriya where seven people were killed overnight and one more was killed today.

Fifty people were wounded in Rifae, including five police, they said.

Four people were killed in clashes overnight in another southern city, Amara.

Amnesty International called on the government to rein in the security forces and investigate the killings.

"It is outrageous that Iraqi security forces time and again deal with protesters with such brutality using lethal and unnecessary force. It is crucial that the authorities ensure a fully independent and impartial investigation," said Lynn Maalouf, Amnesty International's Middle East Research Director.

The United Nations urged the government to "exercise maximum restraint" and allow peaceful protests.

A curfew, lifted early in the morning in southern cities, was reimposed immediately in Nassiriya and later in Amara. Curfews have also been declared in the Shi'ite holy city of Najaf and in Hilla.

In Baghdad, the authorities attempted to head off protests by imposing a curfew from 5am. Troops patrolled main roads and public spaces, but by morning sporadic demonstrations had begun, and troops opened fire with live rounds to disperse them.

Residents of the Iraqi capital queued outside supermarkets and food stores to stock up on supplies in case of a sudden rise in prices or further security restrictions by authorities.

The demonstrations began in Baghdad on Tuesday and quickly grew and spread to other cities, mainly in Iraq's south. Police have fired live rounds, tear gas and water cannon to disperse protesters.

Protesters directed their anger at a government and political class they say is corrupt and doing nothing to improve their lives.

"The people are being robbed. The people are now begging on the street. There is no work, you come to protest, they fire at you. Live gunfire," said a man covering his face in a scarf.

Iraq has the world's fourth-largest reserves of oil, according to the International Monetary Fund, but much of its population of 40 million lives in poverty and without decent healthcare, education or power and water supply.