Brotherhood spokesman Gehad el Haddad said the shooting started shortly before pre dawn morning prayers on the fringes of a round the clock vigil being staged by backers of Mursi, who was toppled by the army more than three weeks ago.
"They are not shooting to wound, they are shooting to kill," Haddad said, adding that the death toll might be much higher.
Al Jazeera's Egypt television station reported that 120 had been killed and some 4,500 injured in the early morning violence on the fringes of a round the clock vigil being staged by backers of Mursi near Cairo's Rabaa al Adawia mosque.
Reporters at the scene said firing could still be heard hours after the troubles started.
"I have been trying to make the youth withdraw for five hours. I can't. They are saying have paid with their blood and they do not want to retreat," said Saad el Hosseini, a senior Brotherhood politician.
"It is a first attempt to clear Rabaa al Adawia," he added.
There was no immediate comment from state authorities on what had happened.
Supporters and opponents of Mursi staged mass rival rallies across the country on Friday, bringing hundreds of thousands into the streets and laying bare deep divisions within the Arab world's most populous country.
Well over 200 people have died in violence since the overthrow of Mursi, including at least nine on Friday, most of them Brotherhood supporters.
Army chief General Abdel Fattah al Sisi, who played a central role in the overthrow of Mursi following huge demonstrations against his yearlong rule, called for Egyptians to rally on Friday to give him a mandate to tackle "violence and terrorism".
Hundreds of thousands heeded his call, but Muslim Brotherhood supporters also staged mass, counter rallies, demanding the reinstatement of Mursi, who was placed under investigation on Friday for a raft of crimes, including murder.
"Live Rounds"
Asked what the strategy of the Brotherhood would be after the second mass killing of its supporters this month by security forces, Haddad said:
"When there are divisions, we go to the ballot box."
Haddad said police started firing, repeated rounds of teargas after 3:00 am local time at protesters who had spilled out of the main area of the Rabaa sit in and were on a main thorough fare close to 6th October Bridge.
"Through the smog of the gas, the bullets started flying," he said. In addition to "special police forces in black uniforms" firing live rounds, he said that snipers shot from the roofs of a university, buildings in the area, and a bridge.
State news agency MENA quoted an unnamed security source as saying that only teargas was used to disperse protesters. He said no firearms were used.
Haddad said the pro Mursi supporters had used rocks to try to defend themselves. On the podium outside the Rabaa mosque, a speaker urged people to retreat from the gunfire, but "men stayed to defend themselves because women and children are inside the sit in", he said.
It was the second time this month there had been a mass killing near Rabaa. On July 8, 53 people died when armed men shot into a crowd after morning prayers close to a Republican Guard compound in the area.
This is much more brutal because the Republican Guard looked like a tactical military operation. This one looks like a much more brutal aggression," Haddad said.
Egypt's army installed interior minister, Mohamed Ibrahim, said on Friday that the month-old Cairo vigils by Mursi supporters would be "brought to an end, soon and in a legal manner", state run al Ahram news website reported.
There is deepening alarm in the West over the army's move against Mursi. The country of 84 million people forms a bridge between the Middle East and North Africa and receives $1.5 billion a year in mainly military aid from Washington.
The investigation into Mursi centres on accusations that he conspired with the Palestinian group Hamas to escape from jail during the 2011 uprising against veteran autocrat Hosni Mubarak, killing some prisoners and officers, kidnapping soldiers and torching buildings.
COMMENTS (5)
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Says something profound about the Muslim Brotherhood when the Egyptian people prefer the military. MB had it's chance - people voted for them with great expectations and their performance was so terrible that people took to the streets in the millions.
Egyptian General Sissy is proving himself to be far more cruel and cunning than Hosni Mubarak. To prevent a united opposition, which ousted Hosni Mubarak, he has already successfully divided Egyptians. He is using all means: the pliant police, judiciary, bureaucracy and heavy fire-power to firm up his rule. He does not seem to care at all about the death and destruction that his lust for power is causing and that he is leading the country to a situation much like that of Iraq and Syria.
What a shame the Egyptians who ousted dictator Hosni Mubarak are welcoming and supporting this man who looks more like an over-decorated band-master than a General and who is only for himself, as his assumption of all powers indicates.
President Mursi had offered negotiations to his opponents and after going through what he is going through, he would be even more willing to accommodate them. With a bit of goodwill on both sides, I am sure the Egyptians on opposing sides could sort out their differences and restore civilian rule, for the benefit of them all, instead of going into the lap of another dictator, so soon after freeing themselves from the clutches of the older one.
Karachi
I weep for our brothers in Egypt. We shall remember for all time the atrocity the seculars have comiited. I promise you these seculars are finished. In Egypt, in Turkey and Pakistan. Islam will win.
And the West sit back and watch, America still cant make its mind up whether or not this is a Coup and there is silence...as more people die. Armed forces still receive Billions in Aid from USA. We all have the blood of the Egyptians on our hands. Democracy has died in Egypt.
Looks like the brotherhood has met its match.