Iraqi security forces opened fire on thousands of demonstrators who defied a curfew in Baghdad on Thursday and exchanged fire with gunmen in southern cities, bringing to 27 the death toll from three days of anti-government protests.

The protests, in which more than 600 people have also been wounded, began over unemployment and poor services but have escalated into calls for a change of government and pose one of the worst security challenges in years in the war-weary country.

They appear to be independent of any political party and seemingly took the security forces by surprise.

"The bullets do not scare us. They do not scare Iraqis. This will all come down over their heads,"said one protester in the capital.

At least 4,000 protesters gathered in Baghdad's Tayaran Square and attempted to march onto the central Tahrir Square but were met with open fire and heavy tear gas.

The United Nations urged the government to "exercise maximum restraint" and allow peaceful protests.

After two days of protests in Baghdad, the authorities imposed an open-ended curfew that started at 05:00 (02:00 GMT) and applied to everyone except those travelling to and from the capital's airport. Ambulances and religious pilgrims were also excluded.

Troops patrolled main roads and public spaces and security forces blocked major roads and bridges, but by morning sporadic demonstrations had begun and troops opened fire with live rounds to disperse them.

Access to the internet was also limited, making it harder to organize protests on social media.

Residents of the capital queued outside supermarkets and food stores to stock up on supplies in case of a sudden rise in prices or further security restrictions by authorities.

With the country at last at peace and free to trade, many Iraqis say their government has failed to rebuild the nation.

Protesters directed their anger at a government and political class they say is corrupt and doing nothing to improve their lives.

"The people are being robbed. The people are now begging on the street. There is no work, you come to protest, they fire at you. Live gunfire," said a man covering his face in a scarf.

Iraq has the world's fourth-largest reserves of oil, according to the International Monetary Fund, but much of its population of 40 million lives in poverty and without decent healthcare, education or power and water supply.