Thousands of indigenous Guatemalans shouted in anger and some threw themselves at the coffins of seven local people who were shot to death during a protest over electricity prices and educational reform in a poor rural area.
President Otto Perez Molina acknowledged that government forces had opened fire during the protest on Thursday, after saying earlier that police and troops on the scene had been unarmed and the protesters had provoked the clash.
Human rights groups condemned the government's actions and charged they were part of a pattern of excessive use of force against protesters.
The protesters were blockading a highway near the town of Totonicapan, about 90 miles west of Guatemala City, when two vehicles carrying soldiers arrived to help police who had been ordered to evict the demonstrators. Gunfire erupted after the troops came. Bullets killed seven people and wounded 33, officials said.
"We were protesting right next to them when they opened fire on us," said Rolando Carrillo, a 25-year-old protester with a bandaged arm and lacerated face that he said resulted from being hit during the clash.
The president told reporters on Friday afternoon that armed security guards had driven the soldiers to the protest. One of the guards apparently was the first to start shooting and then an unspecified number of others fired at the crowd, Molina said. He said seven soldiers injured in the confrontation had said they only fired into the air to protect themselves from what they considered to be a threatening crowd.
Interior Minister Mauricio Lopez Bonilla said the president had suspended the order to evict the protesters from the highway.
Some 20 human rights organisations called an emergency meeting in the capital to discuss the incident and called for a protest in front of the presidential palace.
"We've been saying for a long time that the army's use of force brings with it the risk that something like this could happen," said Francisco Soto, a representative of the Centre for Legal Action and Human Rights.
The dead were buried on Friday afternoon in Totonicapan, where thousands gathered to watch their coffins pass through the town's central square. Hundreds shouted "Justice! Justice!" while dozens of mourners hurled themselves toward the coffins in grief.