The town where Chief Sitting Bull met his tragic end at the hands of the Seventh Cavalry 80 years ago - Wounded Knee, South Dakota - was taken over, lock, stock and barrel, by more than 200 angry Indians last night. In spite of repeated attempts by Federal marshals to oust the Indians during the day, the group was still holding out this evening with 12 hostages and a shopful of guns.

The Indians are all members of a militant group, the American Indian Movement, and they had reportedly converged on the town from Indian reservations across the Great Plains during the night.

They put out a brief statement saying that they would stay in full control of the town until two Senators - Senator Edward Kennedy and Senator William Fulbright - came to South Dakota to hear their grievances. A spokesman said they would "die if necessary" and would not relinquish their hold on Wounded Knee without "a bitter fight."

Senator Kennedy said that he hoped the situation would resolve itself peacefully, but he had "no plans" to visit South Dakota. Senator William Fulbright was in Little Rock, Arkansas, and could not be reached for comment.

According to police and Federal marshals the 200 - and some estimates said that as many as 300 were roaming around the town, which has a population of only about 1,000 - had broken into a trading post and were "fully equipped" with weapons and ammunition. Among the hostages they had taken was a Roman Catholic priest, a police spokesman said.

Federal marshals have had the town surrounded since dawn. A spokesman for the Bureau of Indian Affairs in Washington said that no orders had been despatched to the bureau's police force in and around Wounded Knee, because "we have had no request as yet from the tribal Government on the reservation."

Later police trucks delivered two US Army armoured personnel carriers to the outskirts of the township, although no troops were sent to man them. A number of shots were fired, both by Indians inside the cordon of Federal marshals, and by police outside.

Wounded Knee, about 100 miles south-east of the principle Western town of Rapid City, is in one of America's largest Indian reservations - the so-called Pine Ridge reservation, which is the home of the Oglala Sioux tribe. It is close to Custer, where earlier this year there were serious riots involving Indians and State troopers after a white man, who had been charged with the murder of a local Sioux, was released from prison on bail pending his trial.

Indians complained locally at the time that he had been let off lightly because he was white, and there were demonstrations both in South Dakota and in Washington. Nothing has apparently been done since to calm the Indian temper, and persistent claims of discrimination, unfairness and a "trail of broken treaties" lie behind today's takeover of the village of Sitting Bull's death.

Wounded Knee is particularly famous in modern American history - and particularly infamous to the Indians - for the battle, or perhaps more accurately, the massacre, which took place there on December 29, 1890.