They said one victim was shot in the head and died at the scene while another was shot in the chest and died en route to hospital.
"They beat and shot my husband and others", a resident told AFP in tears.
Tom Andrews, the independent United Nations human rights expert on Myanmar, told The Associated Press this week that the initial restraint of police in dealing with "robust citizen opposition to the coup" has moved in some instances to use of rubber bullets, real ammunition and water cannons.
Earlier on Saturday, several thousand protesters gathered in the northern town of Myitkyina and confronted lines of police before dispersing.
Much of the country has been in uproar since troops deposed State Counsellor Aung San Suu Kyi and here elected civilian government on Feb 1, with large street demonstrations in major cities and isolated villages alike.
Suu Kyi faces a charge of violating a Natural Disaster Management Law as well as charges of illegally importing six walkie talkie radios.
The demonstrators are demanding the restoration of the elected government, the release of Suu Kyi and others and the scrapping of a 2008 constitution, drawn up under military supervision, that gives the army a decisive role in politics.
The junta has justified its power seizure by alleging widespread electoral fraud in November's elections, which Ms Suu Kyi's party won in a landslide.
The state election commission refuted that contention, saying there is no evidence to support it.
"There are some people who don't like NLD but we're not talking about the NLD", he said, referring to Suu Kyi's National League for Democracy (NLD).
The protests have so far been more peaceful than the bloodily suppressed demonstrations during almost 50 years of direct military rule up to 2011.
The military is allowed to appoint its members to 25% of seats in Parliament and it controls several key ministries involved in security and defence.
"Everyone, please participate in protests until we succeed".
"We will consider further action, with our worldwide partners, against those crushing democracy & choking dissent".
Reacting to the Mandalay shooting, the European Union's high representative and vice president Josep Borrell tweeted Saturday that he "strongly condemn (s) the violence".
Her hearing is expected on 1 March. Marching chants of "left, right, left, right" could be heard along with shouts of "shoot, shoot".
An anti-coup protester who was shot in the head during a February 9 demonstration in Naypyidaw died on Friday.
Police tactics have been getting more violent.
Anti-coup protesters flash the three-fingered salute during a rally in downtown Yangon, Myanmar.
Since she was shot, Mya Thwate Thwate Khaing has become a symbol of resistance for protesters, who have wielded massive banners portraying her likeness during demonstrations calling for justice.
At least two people have been killed during fresh protests in Myanmar against a military coup. Than Hlaing. All were sanctioned for their responsibility in serious human rights violations by the military or the Myanmar police force, Raab said.
Burma Campaign UK's Wai Hnin Pwint Thon said she was encouraged by the UK's review of severing business ties with military-linked companies as "it will have an impact" if it hits coffers filled from lucrative gems, beer, and banking sectors.
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