Violent ethnic clashes in Papua New Guinea's port city of Lae have left up to nine people dead and forced the closure of many businesses in the vital hub, Prime Minister Peter O'Neill said.

O'Neill, who took the reins of the impoverished but resource-rich Pacific country in August, has ordered 120 extra police to the town and said he stood ready to impose a state of emergency if calm was not restored soon.

"Lae has been gripped by violence since Thursday, resulting in destruction to properties and loss of nine lives reported," a statement from the prime minister's office said Sunday.

The rioting, which reportedly began after youths protesting against rising crime began fighting with other groups, saw police use tear gas and guns on thousands of rioters, Radio New Zealand International said.

"Basically it was total chaos throughout the weekend," the station's correspondent in the city said. "A lot of people used things like iron rods and bush knives to attack each other."

The PNG National newspaper said that it had independently confirmed five dead and 26 injured, while the Australian Broadcasting Corporation said at least two people had died.

O'Neill said Lae's port was a vital link for many parts of the rugged mountainous country and a shutdown would not only cripple businesses but affect the national economy.

"We must not allow our law-abiding citizens to be dragged into this and turn it into an ethnic conflict," he said in a statement.

"We must act to bring the situation under control. I call on leaders in each community in the city to control their people, and stand up against violence.

"I would like to see life in the city return to normal... and businesses allowed to open their doors."

O'Neill said an inquiry would be established into the cause of the rioting, said to have left homes, businesses and other properties damaged and destroyed.

On Saturday, the Australian government updated its travel advisory for Papua New Guinea to warn that "clashes" had occurred in Lae since Friday and warning that "further violence could occur in coming days".