An official with the Urumqi city government, who gave his surname as Fan, said police on patrol about 2:55 p.m. had seen three Uighur men attacking a fourth Uighur with long knives and batons. When they tried to break up the fight, the three turned against the officers, he said.
"The police fired into the air for warning, but it's not effective. Therefore, the police shot them, according to law," Fan said. Two of them died on the spot while the wounded man was taken to the nearby People's Hospital where his condition was unknown.
The gunfire rang out near one of the city's main Uighur neighborhoods, shattering the relative calm of the afternoon. Witness accounts corroborated some of the police report but also differed in details.
See also a report from the New York Times.
Also, despite Xinhua's insistence that life in Urumqi is "returning to normal," an American teacher living in Urumqi says he still feels like he is living in a black hole.
Update: AP reports that the shooting heightened tensions in an already nervous city:
On Tuesday, paramilitary police with shields and rifles lay a band of spikes across a road to block access to an alley of dingy apartment blocks — near where the shootings occurred — where many poorer minority Uighurs live. They continued to block roads leading into the main Uighur district near the Grand Bazaar market.
A police van parked at the mouth of the alley blared messages in the Uighur language, attacking Rebiya Kadeer, the prominent exiled Uighur activist whom the Chinese government blames for inciting the unrest. It has not provided evidence.
Kadeer, who lives in Washington, D.C., has denied the charges and blames government policies for causing the violence.