Police, who also traded slingshot fire with protesters, had said they would allow the students to continue their march on Tuesday, but that agreement fell apart.
Yangon is the site of numerous student-led demonstrations, including those in 1988 that sparked a pro-democracy movement that spread throughout the country before being brutally suppressed by the military government.
A semi-civilian reformist government took power in 2011 after 49 years of military rule and its response to the current protests has been more muted.
The witness saw about 100 protesters locked in two police trucks, while others fled the town and some were chased into a Buddhist temple.
The Delegation of the European Union, which has been training the police in crowd management, condemned the crackdown, saying in a statement that it "deeply regrets the use of force against peaceful demonstrators."
The Interim Myanmar Press Council said it was filing a complaint, protesting "in the strongest terms against the arrest of reporters" and calling for their release, without saying how many journalists were detained.
Police and government spokesmen were not available for comment. The Information Ministry posted photos on its Facebook page showing student protesters tearing down police barricades and noted that the protesters removed them "with force."
Student leaders rejected the suggestion that they had instigated the violence.
"It hurts my heart whenever they do this to us students, but for sure we will never use violence,” said Lin Htet Naing of the All Burma Federation of Student Unions.
Lin Htet Naing’s wife, a former political prisoner of the previous military regime, was among those arrested in Letpadan while he led a brief protest in Yangon on Tuesday.
Al Jazeera and Reuters