Nearly 60 asylum seekers have been jailed following a riot at the Nauru immigration detention centre.
Reports also indicate hundreds have escaped the facility.
Explosions, fire and chants of freedoms could be heard coming from the centre from about 5pm (AEST) on Friday, freelance photographer Clint Deidenang reported.
"Sounds of the riot very loud," Mr Deidenang tweeted from the scene.
"I can see rocks fly out from the main entrance."
"Police seems (sic) to be holding off break out."
He reported hearing seven explosions and billowing smoke from the entrance to the centre.
Within a couple of hours, thousands of local men came to support police, which ignited another potential problem.
"Just heard a loud speaker informing the people at the entrance not to lay hands on the detainees being transported on a bus to the hospital," Mr Deidenang said in a tweet.
He reported that the riot had ended about 9.40pm and that 59 detainees were arrested and taken Nauru jail.
The photographer also tweeted reports others may have escaped the centre.
"Theres (sic) confirmed report(s) of 200 detainees escaped the ... riot. There's also report of unrest at the police station."
News Limited newspapers reported that at least 15 guards and a police officer were injured.
A Nauruan MP took to state television to call for local men to head to the centre and assist police.
There were also reports of staff being taken hostage for a period of time, News Limited reports.
Ian Rintoul from the Refugee Action Coalition said the unrest was not related to Prime Minister Kevin Rudd's announcement on Friday.
Prime Minister Kevin Rudd declared the policy on Friday, saying the new regime to deny settlement in Australia to asylum seekers who paid people smugglers for unauthorised passage would begin immediately.
The first group of asylum seekers to be dealt with under Labor's new hardline approach to boat arrivals could be transferred to Papua New Guinea for processing and possible settlement within weeks.
The surprise announcement was condemned by refugee advocates as inhumane and praised by the opposition as a "very promising development".
Mr Rudd's hardline approach means people arriving by boat and without a visa will be sent to Australia's Manus Island facility in Papua New Guinea for assessment and, if found to be refugees, they will be settled there.
The first transfers to Manus Island are expected within weeks, following the arrival on Friday of a boat carrying 80 people at the Cocos (Keeling) Islands.
"From now on, vessels that are intercepted will have the new rules apply to them and it will be a couple of weeks because of the health checks ... before the first transfers take place," Immigration Minister Tony Burke said.
The plan is the key plank of a new regional settlement arrangement signed on Friday by the PNG and Australian governments and better positions Labor to go the federal election with a border protection solution.
"Any asylum seeker who arrives in Australia by boat will have no chance of being settled in Australia as a refugee," Mr Rudd, who was flanked by his PNG counterpart Peter O'Neill, said in Brisbane.
"If they are found to be genuine refugees, they will be resettled in Papua New Guinea."
If they are not found to be genuine refugees, they would be repatriated or sent to a safe third country.
The Manus facility currently houses 215 people in tents and shelters and living conditions are described as harsh.
A permanent 600-bed facility is due for completion in January but further upgrades are now expected.
"This is a very hard-line decision," Mr Rudd said.
"But our responsibility as a government is to ensure that we have a robust system of border security and orderly migration."
Mr Rudd said there would be no cap on the number of people who can be transferred to PNG and the new arrangements will apply for the next 12 months and be subject to annual review.
But if the plan leads to a "significant change" in the number of people arriving by boat, the government "stands ready to progressively increasing our humanitarian intake towards 27,000".
"Our expectation ... is as this regional resettlement arrangement is implemented, and the message is sent loud and clear back up the pipeline, the number of boats will decline," Mr Rudd said.
In exchange for PNG's agreement, Australia will fund further aid initiatives, including redeveloping a major referral hospital in Lae and supply half the funding to reform PNG's university sector.
It will also support professional management teams in health, education and law and order.
Mr O'Neill said PNG had its own refugee issues, but he believed the deal would allow orderly processing.
"We believe strongly that genuine refugees can be able to be resettled in our country and within the region in the years to come," he said.
Mr Rudd acknowledged the new approach won't be smooth sailing and he expects the agreement could be challenged through the courts.
Opposition Leader Tony Abbott said Mr Rudd's plan was about processing.
"It is not about stopping the boats," he said.
Australian Greens Leader Christine Milne said the resettlement plan was "ruthless and repugnant".
She accused Mr Rudd of lurching so far to the political right he had "leap frogged" Mr Abbott.