The mostly unemployed demonstrators continued to man roadblocks in the key industrial area of Sohar, over 200 kilometres (125 miles) northwest of the capital Muscat, despite the announcement of new benefits for the jobless and more powers for an elected advisory council.
The protesters have been keeping a vigil at Earth Roundabout, a key intersection on the main road to the capital, for three straight days, defying efforts by police to remove them.
The security forces were nowhere to be seen on Monday after the previous day's deadly violence.
A security official said that the demonstrators attacked a police station near the roundabout and police responded with tear gas and rubber bullets killing two and wounding around five.
But the protesters gave a higher death toll. "I saw five killed at the police station yesterday," said Abdullah al-Meqbali, 25.
State news agency ONA said only that there had been casualties.
"Police and anti-riot squads confronted this group of wreckers in a bid to protect people and their property, which caused casualties," it said.
The news agency said that riots began at dawn on Saturday and continued on Sunday. It said that several government and private cars had been torched.
The protesters also set fire to the Sohar governor's house and an AFP correspondent said a shopping mall had also been torched.
Oman is the latest country to be hit by a wave of protests in the Arab world that has already swept the veteran leaders of Tunisia and Egypt from power. Mass demonstrations also threaten the regimes of Bahrain, Libya and Yemen.
The Omani protesters insist they are not challenging the rule of Sultan Qaboos, who has been in power since 1970, but are merely calling for jobs and reform.
In a move towards addressing their grievances, Qaboos announced that 50,000 new jobs would be provided for Omani citizens and benefits provided for the unemployed.
A royal decree carried by ONA on Sunday said that a monthly allowance of 150 riyals (390 dollars) would be given to each registered job seeker.
Qaboos also ordered the formation of a ministerial committee, headed by palace affairs minister Sayed Ali bin Hmud al-Busaidi, to put together proposals to meet calls for more powers for Oman's elected consultative council.
The 83-member body advises the government on economic and social issues but has no say in defence, internal security or foreign policy.
For decades Oman was an isolated country living on the margins of the modern world, but the 2010 UN Human Development Report released in November said it had made the most improvement since 1970 out of 135 countries.
It is a non-OPEC oil producer.
The sultanate lies on the strategic Strait of Hormuz and adjoining Gulf of Oman, through which much of the world's oil supplies pass, and is a key Western ally in the region