Protests originally against a hike in metro fares have turned into anger at the military and President Sebastian Pinera, who on Monday night proposed a "social agreement" to meet the demands of demonstrators.
Army general Javier Iturriaga, charged with security in the capital, said the 8:00 pm to 6:00 am curfew was "necessary" as Santiago and several other cities were once again gripped by violence.
But in several parts of the capital, protesters defiantly ignored the order and faced off with security forces.
Pinera said on Sunday the country was "at war" as five people died when a factory in a Santiago suburb was torched by protesters, and two women also died after a supermarket was set ablaze by looters.
Since Chile's worst outbreak of social unrest in decades began on Friday, almost 1,500 people have been detained.
Once again on Monday, security forces -- some 9,500 of which have been deployed -- used tear gas and water cannons on the most unruly demonstrators.
Thousands of protesters gathered peacefully in the main Plaza Italia square in the capital on Monday, chanting "Pinera Out!" and "Get out military!"
Art teacher Camila Rojas, 29, said protesters had many demands, but "Pinera's resignation is the first thing."
And while some broke up curbs to throw stones, smashed bus shelters, looted shops, set up barricades and started fires, the vast majority in the capital were in festive mood, chanting, banging drums, paying music and dancing.
"We have to have a party to cancel out in a way those who are doing the excesses," Marcelo Gonzalez, 25, an engineering student with a drum, told AFP.
- 'Implacable enemy' -
A fuming Pinera, said on Sunday: "We are at war against a powerful, implacable enemy, who does not respect anything or anyone and is willing to use violence and crime without any limits."
Santiago and nine more of Chile's 16 regions were under a state of emergency, Pinera confirmed late on Sunday, with troops deployed onto the streets for the first time since Augusto Pinochet's military dictatorship between 1973-1990.
But the president was in more conciliatory mood on Monday, announcing a meeting the following day with rival parties to work on "a social agreement that will allow us all together to rapidly, efficiently and responsibly approach better solutions to the problems afflicting Chileans."
While metro fare hike -- which would have raised the price of peak hour travel from 800 to 830 pesos ($1.11 to $1.15) -- was a trigger, protesters are mostly angry at social inequality.
Long lines formed at shops, service stations and bus stops while the Santiago metro service, suspended on Friday, was partially running again on Monday as some people returned to work.
In Santiago, many employers canceled the working day, while most schools and universities remained closed.
Hundreds of people remained stuck at Santiago's airport as dozens of flights were canceled or delayed.
- 'See this coming' -
Despite a growth rate that should reach 2.5 percent of GDP this year, several social indicators -- such as health, education and pensions -- show a large degree of inequality.
Even right-wing Pinera's Saturday announcement that he was suspending the fare increase failed to calm the rising tide of anger.
"You could see this coming," said sandwich seller Carlos Lucero, 30.
He said the government needed to take concrete measures "to improve salaries, health, pensions."
In some neighborhoods, residents donned the yellow vests made popular by French protesters earlier this year, and wielded sticks vowing to protect their homes, local shops and supermarkets.
Chile international footballer Arturo Vidal, a midfielder for Spanish giants Barcelona wrote on Sunday night: "I pray that my beloved Chile will be better."
Among the buildings torched and damaged in the unrest were the headquarters of the ENEL Chile power company and a Banco Chile branch -- both in the center of Santiago -- and Chile's oldest newspaper, El Mercurio, in Valparaiso. (AFP)