By Erika Solomon

SANAA (Reuters) - Yemeni army soldiers killed at least one person and wounded 17 when they fired live rounds to disperse protesters on Sunday, according to Al Arabiya television and eyewitness reports, in the latest clash in a week of violence that has raised fears of all-out civil war.

The incident took place in the center of Yemen's capital Sanaa as demonstrators marched near the Defense Ministry.

"I saw soldiers from above, in buildings and (on) the bridge," said Mohammed al-Mas, 21, a protester who was wounded in the back, adding that an electricity pole had crashed down and divided the march into two. "Then the gunfire started and I ran back, but I suddenly felt the shot in the back and I don't know what happened next."

Seventeen wounded people were seen in a Sanaa hospital. The report of one dead could not immediately be confirmed.

Some 17 people were killed on Saturday when government forces attacked the main opposition protest camp in Sanaa, said witnesses and medics, bringing the death toll in five days of fighting to around 100.

Analysts fear that the slide toward anarchy in the unruly Arabian Peninsula state could create opportunities for a wing of al Qaeda based there and endanger oil shipment routes through the Red Sea.

Yemen's President Ali Abdullah Saleh unexpectedly returned to the country on Friday after a three-month stay in neighboring Saudi Arabia recuperating from a June assassination attempt.

His arrival in Sanaa came despite the entreaties of Western and Gulf states for the veteran president to end his 33 years in power following an eight-month revolt.

Saleh, 69, has not yet announced his intentions since coming back to Yemen, but said on Saturday he was "carrying the dove of peace and the olive branch."

He is expected to give a speech on state television later on Sunday.

"It's funny he says he came with the olive branch. He's the enemy of the people," said Abdulqawy Noaman, a professor at Sanaa University who was shot in the leg.

Popular protests in January inspired by the Arab Spring sparked a revolt against Saleh's rule that was joined by some of the country's tribal leaders and a dissident general.

Protesters accuse Saleh, his family and government of widespread corruption and failing to address crippling poverty and lawlessness in a land where one in two owns a gun.

The demonstrators are backed by powerful forces including the al-Ahmar family, which heads Yemen's largest tribal confederation the Hashed, and dissident General Ali Mohsen, who defected in March to set up a military confrontation.

The streets of Yemen's capital where protests happened daily this week are now divided between rival forces loyal to the president, the general and the tribes.

On Sunday, hundreds laid out prayer mats in the plaza the protesters have dubbed Change Square to pray for those killed on Friday. Ten bodies wrapped in the Yemeni flag, mostly tribesmen from the al-Ahmar clan, were laid out in the square where protesters chanted: "Martyrs be consoled, we will try the murderer!"

(Reporting by Erika Solomon; Writing By Angus McDowall; Editing by Andrew Torchia and Giles Elgood)