Police fired live rounds during the disturbance
A suspected looter was shot by guards, a passer-by was hit by a stray bullet and an Asian man was stoned to death, while police have fired live bullets.
There have been several attacks on Asians in Kampala, and a Hindu temple has been damaged.
The sugar firm which wants to use part of the Mabira forest is Asian-owned.
Environmentalists say the move threatens the existence of rare species of trees and birds in the 30,000 hectare forest.
'Frightening'
The march began quietly, with some 1,000 people marching through central Kampala, carrying placards and tree branches.
We were inside the temple and the protesters started attacking us from outside
Dipaul Patel
Talking point: Jobs vs the environment
"People were demonstrating peacefully when there was a misunderstanding with the police. All of a sudden they opened fire," environmental activist Frank Muramuzi told Reuters news agency.
The BBC's Sarah Grainger in Kampala says protesters threw stones at the police and set fire to vehicles.
An Asian motorcyclist was attacked and later beaten to death, witnesses say.
Our correspondent says the demonstration took on a racial dimension with some protestors blaming the country's Asian-Ugandan population for the situation because the parent company of the sugar firm, Mehta Grou, is owned by an Asian Ugandan.
Reuters also reports that police had to rescue about 40 men from a Hindu temple after it was attacked by a mob.
Some Asian residents were targeted by the protesters
"We were inside the temple and the protesters started attacking us from outside," 50-year-old Dipaul Patel told Reuters. "It was very frightening."
A police source says about 20 people have been arrested.
The Sugar Corporation of Uganda (Scoul), part of the Mehta group, wants to expand its plantations in central Uganda, taking over one-third of the Mabira forest.
Campaigners are now calling on Ugandans to boycott its sugar products.
In recent years, Ugandan Asians, including the owners of Mehta, have started to return to the country, after being expelled by Idi Amin in the 1970s.
They used to control much of the economy, sparking resentment among some Ugandans.
Text campaign
Parliament is yet to change the status of the forests and campaigners have threatened legal action if the forest is given away.
The police blocked the protesters
Public protests over the government plans have heightened in the capital and car bumper stickers urging people to save Mabira forest have become very popular, our correspondent says.
There has also been a text message campaign, urging people to take part in the protests.
Supporters of Scoul's bid for more land say the expansion of would create more jobs and income for the country.
They dismiss those opposing the move saying subsistence farmers have already encroached on much of the forest land.
The kabaka, or king, of the local Buganda community has offered to give alternative land for the sugar company in a bid to save the hardwood forest.
Four people are reported killed in Kampala, Uganda, amidst protest marches organised against a government proposal to cut down 7,000 hectares of forest land to expand a private company's sugarcane plantations. 

Two men of Asian descent were stoned to death by a mob, and the deaths of two others were under investigation, according to police sources. A witness said that one of the Asians was attacked after he ran his motorcycle into a crowd. ''BBC News'' reported that a looter was shot dead and a bystander wounded by security guards. 

Asian businesses and a Hindu temple were attacked by rioters; in response, police deployed armoured cars, used tear gas, and opened fire to quell the violence. A group of Asians trapped in the temple by a mob were rescued by police. 

The sugar company is owned by the Mehta Group, established by Indian immigrant Nanji Kalidas Mehta. Asian immigrants formed a prosperous trading community in Uganda before they were expelled by Idi Amin in 1972. Many returned following Amin's downfall, but some Ugandans view their presence and business with suspicion. 

The Mabira reserve forest in south-east Uganda covers about 30,000 hectares and is home to several rare species; it has been a reserve forest since 1932. A primatologist working in the area announced in February that monkeys in the forest previously thought to be Gray-cheeked Mangabey (''Lophocebus albigena'') were in fact a new species.  

President Yoweri Museveni's government is considering a proposal to de-notify and transfer 7,000 acres of land to the Sugar Corporation of Uganda Limited (Scoul) to expand its sugarcane plantations. A cabinet paper says the plan will generate 3500 jobs and will contribute 11.5 billion shillings to the treasury.

Arched tree root in the Mabira forest. Source: S A Perez.
Scoul bills itself as the largest employer in East Africa, with 7,300 employees manufacturing sugar and industrial alcohol at its 10,000 hectare Lugazi estate. The Ugandan newspaper ''Monitor'' reports that Scoul's plantations have been reduced in acreage after it failed to reach agreement over existing leases with various landlords. 

Scoul says that plantations at the Mabira forest will help double its annual production to 110 metric tonnes, and in a newspaper advertisement published on Thursday, said that "anti-development lobby groups" were misleading the public about the Mabira plan. In its environment policy, the company says it is committed to a managing land and wetlands resources in an environmentally sensitive manner. 

The plan is opposed by Ugandan MPs because of its environmental impact. An official from the Ugandan National Forestry Authority told the news agency AFP that the plan will destroy the area's biodiversity and affect locals' livelihood.   

Scoul says the forest land is already being encroached upon by subsistence farmers.

Meanwhile, the group has been offered land in Mengo and by the Anglican church in Mukono as an alternative to the Mabira plan. Scoul Chief Executive S.C Khanna says that he will consider such an alternative if the land is fertile, free of "squatters" and close enough — within 30 km of the sugar factory — so that the cost of transporting sugarcane is viable. 

Scoul has increased security after multiple fires destroyed crops at its plantations.