Riot police armed with tear gas, clubs and rubber bullets stormed Manama's main Pearl Square to drive out thousands of demonstrators.
Protesters said police continued their violent raid even when the demonstrations were peaceful.
Thursday morning, tanks hit the streets of the capital as the military issued a ban on any more protests in the Persian Gulf nation.
The Interior Ministry warned Bahrainis to stay off the streets. Banks and other key institutions did not open, and workers stayed home, unable or too afraid to pass through checkpoints to get to their jobs.
Foreign Minister Khalid Al Khalifa justified the crackdown as necessary because the demonstrators were "polarizing the country and" pushing it to the "brink of the sectarian abyss."
The protesters' demands have two main objectives: force the ruling Sunni monarchy to give up its control over top government posts and all critical decisions; and address deep grievances held by the country's majority Shiites, who make up 70 percent of Bahrain's 500,000 citizens but claim they face systematic discrimination and poverty and are effectively blocked from key roles in public service and the military.
The White House is urging restraint and nonviolence in Bahrain and other Middle Eastern countries facing similar unrest.
The Associated Press contributed to this report.