A Reuters witness said the shooting happened when security forces were clearing Bugandan loyalists from the charred remains of the tombs where their royalty are buried, so President Yoweri Museveni could visit the site, gutted by fire on Tuesday night.
Police spokeswoman Judith Nabakooba said two people were killed at the tombs and five wounded. She said it was not clear who was responsible for the deaths.
Reuters Television footage showed Red Cross officials carrying away a number of people with gunshot wounds.
The cause of the blaze which destroyed the thatched-roof mausoleum and centuries-old royal relics at the UNESCO World Heritage Site has not been identified, but some angry protesters suspected foul play.
"They have a wide conspiracy of destroying everything that marks there was a great kingdom called Buganda, and this is one of them," loyalist Jemba Erisa told Reuters at the tombs, in a reference to the government.
The Baganda are Uganda's largest tribe and were instrumental in Museveni coming to power 24 years ago. Museveni based his five-year military struggle in the kingdom's heartland, and support by the Baganda has helped him stay in power.
But relations have been increasingly strained since Museveni blocked the reigning Bugandan monarch, or Kabaka, Ronald Mutebi, from visiting a part of his kingdom last year.
The standoff sparked two days of rioting in the capital, Kampala, that killed at least 15 people. Hundreds were arrested and the authorities shut down the kingdom's radio station for allegedly fanning violence.
Analysts said the riots last September were unlikely to be the last turmoil before a presidential election in 2011 because the opposition was using Buganda as a tool for political mobilization against Museveni. The Kabaka wants more autonomous control over resources in his kingdom, such as land and taxes, but the government says he is only a cultural leader and must steer clear of politics.
The violence comes at a time of rising investor interest in east Africa's third biggest economy following the discovery of an estimated 2 billion barrels of crude oil near the remote western border with the Democratic Republic of Congo.
A Bugandan kingdom official, Charles Peter Mayiga, said the gutted mausoleum was built in 1860 by Kabaka Mutesa I and was an object of deep historical and cultural reverence for the Baganda people.
Uganda has four traditional kingdoms with clearly defined boundaries and leaders who are revered by their subjects. The kingdoms' relationship with government since independence from Britain has been fraught with tension and confusion.
Former President Milton Obote abolished them in 1962, then Museveni won plaudits for restoring the cultural and ceremonial powers of the leaders in the 1990s. However, analysts say the legal relations with Kampala were never clearly defined.
The Buganda kingdom covers 9,000 sq miles (23,300 sq km) of central Uganda.
The kingdom's leadership was meeting to try to find out what had caused the fire. The police said they had not established what started the blaze.
"Our officers are at the scene trying to examine every available evidence and piece together bits of information to establish what clearly happened but no conclusion has been reached yet," said police spokeswoman Nabakooba.
