Hong Kong-based human rights monitors said the trouble erupted on Friday after police declared the mosque an illegal structure.
Chinese officials confirmed a mosque was pulled down. They said there were injuries and some people were detained.
The incident is said to have taken place in Taoshan village, near the town of Hexi in Tongxin county of the Ningxia Hui Autonomous Region, a sparsely-populated semi-desert area in northern China.
A party official in Ningxia told the BBC that the mosque in Hexi was an illegal structure, so they knocked it down.
According to the Hong Kong Information Center for Human Rights and Democracy (ICHRD) about 1,000 police officers clashed with villagers when they arrived to demolish a newly-renovated mosque.
The Hui ethnic group – who mostly inhabit the region – are one of a number of Muslim minority groups in China.
In 2009, riots erupted in western Xinjiang province when nearly 200 people died after tensions flared between Muslim Uighurs and Han Chinese.