At least 10 people were also injured in the incident late Saturday in Ukhrul town, 80 km north of capital city Imphal.
The protests were organised by the United Naga Council (UNC), an organisation of Naga tribals.
"Suddenly, the agitators turned violent, forcing the police to fire tear gas shells before opening fire to bring the situation under control. Two protesters died on the spot," a police official said.
The injured were admitted to a hospital. One of the protesters, who was hit by a bullet in the chest, has been shifted to Jawaharlal Nehru Institute of Medical Sciences hospital here.
The Ukhrul district authiorities two months back imposed prohibitory orders under Section 144 CrPc for an indefinite period after the killing of an Ukhrul Autonomous District Council member by unidentified armed elements. Ukhrul district borders Myanmar.
The 2.72-million population Manipur has nine districts, four in the valley and five in the hills. Most of the hill districts, including Ukhrul, are mostly inhabited by the Naga and Kuki tribal communities.
The Naga community has been demanding a separate administrative set-up within Manipur, a demand that has been opposed by the Congress party-led state government.