Two fishermen in the village of Aun Daw Ji were reportedly beaten, with one bludgeoned to death and the other left injured. The incident took place in a village adjacent to IDP camps where Eid celebrations were in full swing.
Further violence was sparked when news of the attacks got out and a mob of IDP camp residents rushed the police shortly after 11am, who then opened fire on the crowd killing at least four.
Rohingya spokesman Aung Win witnessed the incident, and said that some camp residents went on to torch the police station as well as several homes.
Aung Win said he did not know if the police action was part of a deliberate clampdown on celebrations for the Muslim festival of Eid, as has been rumoured.
He voiced concerns that the death toll from the incident may have been underestimated, saying he had not seen violence of this magnitude since the bloodshed of June last year.
"I am worried because the police hid some of the dead bodies and they didn't send all the injured people to hospital.
"I saw them put about 15 to 20 people on a truck and arrest them and I am worried they will hold them without (proper reason)."
He also said people trying to leave the village found themselves subject to attacks.
"After 2pm the women were trying to flee the village and the police came and beat the women," he said.
A reporter on the ground said security presence in the area had been stepped up significantly since the incident.
The Myanmar Times spoke with a driver who enters the camp with NGO workers on a regular basis said the atmosphere on Thursday had been particularly good as celebrations began for Eid.
"Everyone seemed very happy and it felt safe. I checked with my contacts in the camp before I went in yesterday and they said it was all good so I was surprised when I heard this had happened this morning."
It appears the situation there is still not entirely stable, with reports emerging of Rohingya refugees chanting for the release of detained activist U Kyaw Hla Aung, and police and army firing into the crowd.
Arrests were also reportedly made at the Baw Du Pha camp.