The Ulster Unionist leader, David Trimble, called on the Prime Minister, John Major, to intervene as for the second day Royal Ulster Constabulary officers barred loyalists from marching through a Catholic area of Portadown, Co Armagh.
Tensions in both communities ran high as scores of loyalist youths hijacked and set fire to four lorries in the town centre after police had broken up protests.
Mr Trimble accused officers of "deliberate provocation" after they fired plastic bullets at loyalists as soldiers set up a concrete and barbed wire barricade on the Drumcree Road leading into the Catholic area of Garvaghy Road.
The district Orange leader, Harold Gracey, promised further action throughout the province unless they were able to march down the route. "We have our contingency plans. I think the province is going to erupt," he added. "This is not just the siege of Drumcree but the siege of Ulster."
Political leaders warned the growing violence could threaten the fragile peace in the province.
The stand-off looked likely to last longer than the three-day confrontation last year when loyalists eventually marched along the route in silence.
Among the 5,000-strong Catholic community the feeling was of "resolute determination" not to allow the Orangemen to have their way again. Breandan MacCionnaith of the Garvaghy Road Residents Association said: "We have had two days of violence and there is no sign of the Unionist leaders trying to control their people." In an attempt to break the logjam Mr Trimble and the Democratic Unionist leader, Ian Paisley, called on Downing Street for action.
The worst violence came in Portadown town centre when police broke up loyalist demonstrations at noon. At least four lorries were set on fire to establish impromptu roadblocks which the Army cleared away.
The RUC, which on Saturday decided to ban the march, erected a concrete and barbed wire barrier at the point where the marchers were halted on Sunday, 50 yards from Drumcree church. As officers moved in to clear the way they were pelted with missiles, and responded with plastic bullets.
Last night up to 2,000 police officers faced several thousand loyalist protesters.
Police said it was too early to link the murder of a Catholic man found dead near Lurgan, a few miles from Portadown, with the sectarian disturbances in the town.
Part-time taxi-driver Michael McGoldrick, 31, from Lurgan, was found dead with head injuries yesterday morning.
The sectarian divide, page 15