"Five deaths have been registered among the outlaws" in Diraz, near the capital of Manama, where the police opened fire to disperse the sit-in outside the home of cleric Isa Qassim, the ministry said in a Twitter message.
Witnesses had earlier told AFP that several civilians were wounded when police officers fired at demonstrators throwing stones and Molotov cocktails at security forces.
"A total of 286 arrests were made, including fugitives that had escaped from Jau Prison," the ministry said.
"Several terrorists and convicted felons were also apprehended with a large number of them hiding in the residence of Isa Qassim," it added.
Qassim is considered the spiritual leader of Bahrain's majority Shiite community.
A US State Department official said Washington was "concerned" by the reports of protesters killed and was following events in Bahrain very closely.
"We urge restraint on all sides in responding to today's developments and call on all parties to contribute to a climate conducive for dialogue and reconciliation," the official told AFP.
Meanwhile, Iranian Foreign Minister Mohammad Javad Zarif said the deadly crackdown by Bahraini forces on protesters was the "first concrete result" of US President Donald Trump "cozying up to despots" in Saudi Arabia.
- 'A blank cheque' for repression -
In a meeting with Bahrain's King Hamad in Saudi Arabia at the weekend, Trump made a clear break from previous US policy.
The US leader told the king on Sunday it was "a great honour to be with you" and said there "has been a little strain but there won't be strain with this administration."
The Britain-based Bahrain Institute for Rights and Democracy (BIRD) said Trump had "effectively (given) King Hamad a blank cheque to continue the repression of his people."
It said the US had "blood on its hands" for supplying arms to Bahrain despite what it called an "intensified repressive campaign on civil society in Bahrain."
The kingdom has been rocked by unrest since 2011, when local authorities backed by a Saudi military force crushed Shiite-led protests demanding a constitutional monarchy and an elected prime minister.
Earlier Tuesday, BIRD had announced one death as the police moved to disperse the long-running protest.
Amnesty International identified that protester as Mohamed Zayn al-Deen, 39, and said he had died of birdshot wounds to the head.
The human rights watchdog called for an independent investigation into the security forces' use of "excessive force" against protesters it said were mostly peaceful.
- Stripped of citizenship -
Bahrain police arrested 50 "fugitives," including prison escapees "convicted over terrorism" charges, the Nahrain interior ministry said earlier.
Several members of the security forces were injured, it added.
The Bahrain authorities have accused Qassim, sentenced Sunday to a suspended one-year jail term for illegal fundraising and money laundering, of serving "foreign interests" and promoting "sectarianism and violence."
A court last year stripped him of his citizenship, sparking repeated sit-ins outside his residence in Diraz.
Bahraini authorities have also accused Iran of fomenting unrest in the kingdom, ruled for more than two centuries by the Sunni Al-Khalifa dynasty. Tehran has denied any involvement.
The government's clampdown on dissent has drawn harsh condemnation from international rights groups and governments.
Pictures posted on Twitter by opposition groups showed demonstrations that purportedly broke out in nearby Shiite villages protesting the crackdown in Diraz.
- Rights concerns -
The tiny Gulf state is a key regional ally of the United States and is home to its Fifth Fleet, but the administration of former president Barack Obama frequently scolded Manama over rights concerns.
Manama has imprisoned dozens of Shiites accused of taking part in demonstrations and stripped at least 316 Bahrainis of their nationality since 2012, according to Amnesty.
BIRD says Manama has escalated its repression since mid-2016.
A court last year ordered the dissolution of the kingdom's main opposition group Al-Wefaq after authorities accused it of "harbouring terrorism."
An 18-year-old Bahraini died in March, nearly two months after he was shot in the head fleeing a raid on Qassim's house, Amnesty said.
Bahrain's parliament in March voted unanimously to grant military courts the right to try civilians charged with any act of "terrorism."
Rights activists fear Qassim could be among the first to face court-martial.