Bolivia's central government has said it will not recognise a parallel administration set up by protesters in the central state of Cochabamba.
Cochabamba's tensions reflect deep divisions in Bolivian society
The demonstrators, mainly coca leaf growers who back President Evo Morales, want the local governor, who is aligned with the opposition, to resign.
But Mr Morales's administration said their decision to set up an alternative government was illegal.
Last week, two people died when the rival groups clashed in Cochabamba.
Cochabamba is a city in turmoil, reflecting the divisions in the whole of Bolivia, says the BBC's South America correspondent Daniel Schweimler.
Mr Reyes Villa has been calling for a vote on greater local autonomy
Trade unionists, indigenous farmers and coca-leaf growers have been holding almost daily demonstrations to call for the removal of Cochabamba Governor Manfred Reyes Villa, an elected official.
He is one of several state governors calling for more autonomy and greater distance from Mr Morales's radical central government.
He has fled Cochabamba and has said he will only return when the demonstrations stop, although he insists he will not step down.
A group of radical protesters have set up what they call an alternative revolutionary council and were hoping to be recognised by the central government.
But a presidential spokesman, Alex Contreras, said: "We do not recognise any governor other than Mr Reyes Villa and we insist that dialogue be restarted to find a solution."
Mr Reyes has the support of the wealthy elite and the gas and oil-producing regions of Bolivia where many oppose President Morales's plans, which include land reform, to alleviate poverty in South America's poorest nation.
The conflict may have surfaced in Cochabamba, Bolivia's third largest city where Mr Morales enjoys substantial support, our correspondent says, but there are tensions bubbling around the country.
Those on both sides of the divide are watching to see how the government handles a very sensitive situation.