Police said 17 people had been killed and 40 wounded and defended the action as “appropriate” to stop bank robberies and jail breaks during violence instigated by the opposition.
“While restoring law and order, 17 people were killed and 40 were injured, mainly from tear gas,” a police statement said.
But doctors at hospitals in Addis Ababa counted 22 civilians dead.
One doctor said a hospital had treated “several hundred” people for gunshot wounds.
Witnesses described clashes between police and rock-throwing protestors in three downtown districts, particularly in the Mercato area.
A tense calm settled over the capital on Wednesday evening with a heavy police presence visible.
The violence is the worst in the Ethiopian capital since 2001 when a strike by University of Addis Ababa students led to riots in which more than 30 people were killed.
The latest protests began on Monday when in defiance of a ban, students demonstrated against alleged vote rigging in the May 15 elections.
The opposition Coalition for Unity and Democracy (CUD) has accused the ruling Ethiopian People’s Democratic Front (EPRDF) of rigging the poll and is trying to quash the official result from the election board.
The European Union mission that observed the elections “deplored” Wednesday’s violence and said opposition leader Hailu Shewal had been placed under house arrest.
Hailu told a reporter by telephone that he had been prevented from leaving his home even before Wednesday’s clashes.
The government insisted police had acted to protect the capital, where all demonstrations were banned for a month after the election.
Information Minister Berekat Simon said the government regretted any deaths but insisted the crackdown had been necessary to prevent looting and crime.
CUD vice-chairman Berhanu Nega denied the group was responsible for the violence and accused the government of trying to “terrorise the public” and “destroy the opposition.”
United Nations chief Kofi Annan condemned the unrest.
“The Secretary General is seriously concerned about the tense situation that has arisen due to controversies regarding the conduct of the recent elections,” Mr Annan’s spokesman said in a statement.
“The efforts of the National Electoral Board of Ethiopia to investigate the allegations of election irregularities, with the participation of all relevant parties, must be fully supported,” he said.