At least 20 persons were killed and more than 120 wounded yesterday when a street demonstration organized by El Salvador's newly formed united revolutionary front ended in a gun battle with government and paramilitary forces.

According to several sources, the death toll was above 40, but this could not be independently confirmed, special correspondent Larry Rohter reported last night.

One of the wounded was an American journalism student from Washington state, Bruce Douglas Yaeger, Rohter reported. Yeager was shot in the leg. s

More than 50,000 people participated in the march, which had been called by leftist leaders as a show of "revolutionary unity" and to protest the policies of the moderate, military-civilian junta that has ruled El Salvador for the past two weeks.

Members of the new leftist coalition, formed Jan. 9, include four major groups advocating government overthrow by popular insurrection, plus their respective military wings and the Communist Party of El Salvador.

Yesterday's battle came after weeks of mounting political tension and violence following the resignation of three civilian members of the ruling five-man junta. The three charged the military with refusing to carry out promised reforms and becoming a puppet of the powerful economic oligarchy. A new government was formed by the Christian Democratic Party after the armed forces once again pledged to implement sweeping social and economic changes.

An official military spokesman first said the shootout began when marchers fired on troops protecting the government headquarters, killing one soldier. Later, however, the government radio network said the violence began when unknown civilians fired on the marchers.

A spokesman for the leftists blamed "right-wing agents provocateurs" for beginning the gunfire.

Yesterday's demonstration had been widely advertised on radio and television, thanks to a new government policy of allowing air time to any political group that can afford to buy advertisements. Tens of thousands of peasants had responded to the call, arriving in the capital early this morning on trains and buses.

The march was scheduled to end with a rally and speechmaking in a downtown park. But as members of the United Popular Action Front marched past the National Palace, chanting slogans and waving banners, shots were fired, sending hundreds of people scurrying for cover.