The clashes, all the way from Mirpur-1 intersection to Shah Ali Mazar, left traffic blocked in the area for hours on Wednesday afternoon.
Shops were hastily shuttered down and customers who had come for Eid-ul-Fitr shopping left the area or sought shelter out of fear.
The footpath traders and police traded brickbats, with police eventually dispersing them with a baton charge.
Shah Ali Police Station OC Anwar Hossain said several police personnel were injured in the clash.
DMP Assistant Commissioner (Traffic) Abu Tayob Md Arif Hossain said the drive against illegal shops on footpaths would continue.