Police stopped the protesting students from leaving the University of Papua New Guinea this morning, the ABC reported.
Virgin Australia VAH.AX turned back a flight from Brisbane to Port Moresby amid reports of the violence and Qantas Airways QAN.AX canceled one of its flights.
Medical officials in Port Moresby told Reuters that at least 10 students had been admitted "in a hard situation".
A major aid agency, which declined to be named as its report was preliminary, said it had information from the university clinic that at least 15 students were wounded, with four killed.
Later on Wednesday, Virgin Australia said in a statement it had actually reversed an air travel from Brisbane to Port Moresby "due to safety concerns regarding civil discontent in Port Moresby".
The incident took place in the capital, Port Moresby.
"There is also shooting going on, open gunfire".
CNN was unable to confirm reports that businesses and shops had shut down following the unrest. Students in thousands have been boycotting their classes demanding stepping down of the PM.
"They fired shots, they fired shots directly at the crowd".
The University of Papua New Guinea has obtained a court order banning student protesters from further demonstrations following a violent scuffle with police, as officials on Thursday tried to piece together what happened during a clash that left scores of students wounded.
The trouble started when the police fired at the crowd to stop the students from marching on the parliament building. "I was lucky to escape. people ran for cover in all directions".
In a Facebook Post, resident Emmanuel Kare wrote that 'it's confirmed that 2 UPNG students are murdered by rogue policeman at UPNG. Some of the students wore black- that is the Papua New Guinea style.
'They are dying for this nation now and for the people'.
Albert Schram, the vice-chancellor of PNG University of Technology in the country's second largest city, Lae, said about 2000 students and staff had been locked on campus with a police vehicle at the gates. Pictures showed several men with what appeared to be serious stomach, chest and leg wounds. "They wore black because they were in mourning for Papua New Guinea".
On Wednesday, students planned to catch buses from the university campus in Waigani to protest at parliament house during sitting on Wednesday, demanding O'Neill stand down while the allegations are investigated.
The protests have been ongoing for five weeks, with students voicing opposition over how the prime minister has been addressing the management of the economy and allegations of graft. O'Neill, who came to power in 2011 promising to reign in corruption, has actually dealt with accusations he authorised countless dollars in fraudulent payments to a leading law firm.
Video shows dozens of shots ringing out, as students flee from the protest.
Australian Foreign Minister Julie Bishop called on all sides "to deescalate the tensions and. respect the peaceful and lawful right to protest".
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