Local authorities in the US city of Charlottesville have voted to drape two Confederate statues in black fabric during a chaotic meeting packed with irate residents who screamed and cursed at councillors over the city's response to a white supremacist rally.

The anger at Monday night's meeting, during which three people were arrested, forced the council to abandon its agenda and focus instead on the death of Heather Heyer, who was killed when a car slammed into a crowd protesting against the August 12 rally.

Covering the statues is intended to signal the city's mourning for Heyer.

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The council meeting was the first since the "Unite the Right" event, which was believed to be the largest gathering of white supremacists in a decade. The demonstrators arrived in Charlottesville partly to protest the city council's vote to remove a statue of Confederate General Robert E Lee.

That removal is in the midst of a legal challenge. A state law passed in 1998 forbids local governments from removing, damaging or defacing war monuments, but there is legal ambiguity about whether that applies to statues such as the Lee monument that was erected before the law was passed. A judge has issued an injunction preventing the city from removing the Lee statue while the lawsuit plays out.

Mayor Mike Signer told The Associated Press on Tuesday that city staff had begun working to find a way to cover the large statues with a material that can withstand the elements. The council believes doing so would not violate the state law, he said.

Anger at the mayor

At the meeting, many speakers directed their anger at Signer. They expressed frustration that city leaders had granted a permit for the white supremacist rally and criticised police for allowing the two sides to clash violently before the rally even started.

The fighting went on largely uninterrupted by authorities until the event was declared an unlawful assembly and the crowd was forced to disperse.

Later, a car rammed into a crowd of counter-protesters, killing Heyer and injuring more than a dozen others.

"Why did you think that you could walk in here and do business as usual after what happened on the 12th?" City Council candidate and community activist Nikuyah Walker said.

#Charlottesville city council mtg tonight. This is Nikuyah Walker speaking truth to power. She is running for city council & is what we need pic.twitter.com/aqRb6Wneso — Ken Horne (@HorneKen) August 22, 2017

The mayor tried to restore order, but as tensions escalated, the meeting was temporarily suspended. Video showed protesters chanting "blood on your hands" as Signer stood at the front of the room. Others held signs calling for his resignation.

Three people were arrested on charges of disorderly conduct or obstruction, police said.

"I think what you saw last night was a traumatised community beginning the process of catharsis," Signer said.

The council also voted to take the procedural first steps towards removing a state of Confederate General Thomas "Stonewall" Jackson. City leaders had initially planned to leave it in place.

"I believe that the removal of the Confederate statues is a necessary part of showing that this community can be truly a community of mutual respect," Councilwoman Kristin Szakos, who proposed covering the statues, said in a statement.

"We must do that if we hope to move forward to true justice and equity. We should have done it years ago."