Explosions were heard and smoke was seen billowing over the capital, al-Jazeera reported. A curfew was imposed on downtown areas including the Pearl Roundabout and the Bahrain Financial Harbour.
Witnesses said the forces -- armed with tanks, helicopters and jeeps mounted with machine guns -- fired tear gas, rubber bullets and possibly live ammunition into crowds of protesters, as well as trashing vehicles, The New York Times reported.
The attack set fire to tents and vegetation, forcing troops to use water cannons -- normally reserved for crowd control -- to extinguish the blazes.
Youth movements had called for a massive demonstration Wednesday afternoon, but it was unclear whether protesters would dare to regroup.
The opposition Wefaq Party canceled protests, citing the danger, al-Jazeera reported.
King Hamad bin Isa al-Khalifa Tuesday imposed martial law. On Monday, 2,000 troops from Saudi Arabia and the United Arab Emirates were deployed to the island monarchy.
Witnesses also said the troops took over Salmaniya Hospital, which became an opposition stronghold when the government tried to expel protesters who for weeks have been calling for an end to the monarchy.
Activists and soldiers outside the capital said they read reports on Facebook and Twitter of injured civilians unable to get to hospitals because ambulances reportedly were barred from operating, the Times said.
"Right now, no one is allowed to leave their houses and the hospital is under siege," a doctor who volunteers at Salmaniya Hospital said. "They are not allowing ambulances in. Doctors are being attacked and asked to leave" at gunpoint.
The doctor said makeshift aid stations were being set up in mosques and homes.
Journalists were warned not to walk the streets and one was seen being arrested by soldiers, the Times said.
A senior U.S. diplomat arrived in Manama, trying to find a way to ease tensions while urging the government to exercise restraint.
Doctors at Salmaniya Hospital estimated 200 people were injured Tuesday and two were killed in the village of Sitra in clashes with riot police. The government has accused protesters of running over and killing a security force member and firing automatic weapons at others.
Bahrain is headquarters to the U.S. Navy's 5th Fleet and allows U.S. military aircraft to operate from its main air base.
The Obama administration has been urging the royal family to move more quickly on its promised political reforms.
A White House spokesman called for calm and restraint, and expressed concerns about violence from all sides.
"The use of force and violence from any source will only worsen the situation," National Security Council spokesman Tommy Vietor said. "One thing is clear: There is no military solution to the problems in Bahrain. A political solution is necessary and all sides must now work to produce a dialogue that addresses the needs of all of Bahrain's citizens."