TEHRAN, Iran (AP) _ Riots broke out in the northeastern Iranian city of Sabzevar on Thursday, killing at least two people, after the government decided not to name the city a provincial capital.

More than a dozen other people were wounded after police used tear gas and bullets to disperse rioters, a hospital official said on condition of anonymity.

Earlier this week, the government approved a plan to divide Khorasan province into three. The city of Bojnourd was picked over Sabzevar as the capital for one of the new provinces.

Sabzevar, a city of 600,000 people, would have received a higher state budget had it won the title.

Sporadic clashes began late Wednesday and turned into full-fledged riots on Thursday as protesters smashed windows of public buildings and banks, then blocked railway routes and major roads in the ancient city, Jafar Akbari, a shopkeeper in the city, said by telephone.

``People in Sabzevar were expecting their historical city to become a provincial capital but their call has been rejected,'' Akbari said. ``People are protesting to gain their rights for their city to become a provincial capital.''

Several people were being treated for gunshot wounds, officials at the Emdad and Heshmatieh hospitals in Sabzevar said. Akbari said all shops were closed in the city, 404 miles east of Tehran.

Another witness, speaking on condition of anonymity, said clashes were continuing Thursday although police reinforcements had arrived. The witness said protesters also attacked the governor's office, causing substantive damage.

Another witness said the hard-line Basij paramilitary forces were dispatched to control the rioting and opened fire on the protesters. He said the protesters set a bank and a religious school on fire and damaged a car in front of a bank.

Akbari said the Tehran-Mashhad railway, about 43 miles north of Sabzevar, was closed and people also blocked a main road to the capital, Tehran.