Chaos erupted in the so-called autonomous zone in Seattle late Sunday when a man allegedly broke into an auto repair store, stealing items and trying to start a fire.
Workers at the business called the police but said they never came.
Groups of activists took over an area comprising multiple city blocks in Washington state's largest city last week after police officers, who clashed with them, abandoned a precinct building.
Response times to crimes including rape have soared in the area since then, according to Police Chief Carmen Best.
The incident on Sunday was captured by reporters with the Daily Caller and One America News as well as a man live streaming video during the occupation.
It started when a man identified as the owner of Car Tender, a car repair store on 12th Avenue, found a male inside of the shop.
Workers said they put out a fire that the male had started. The male was questioned but refused to be searched.
As word of what happened made it to occupiers, dozens rushed to the store and tore down fencing separating it from the street.
At least two people at the business brandished guns, prompting occupiers to retreat back to the street. Workers said they couldn't search the alleged thief because he wouldn't cooperate with them and eventually let him go.
Things took another turn when the man who allegedly broke in and started a fire returned to the area outside the store later in the night. He quickly left after workers pointed him out.
When someone from the crowd tried assaulting the man, he slipped away.
A Car Tender employee, reached on Monday, declined to comment.
The Seattle Police Department didn't return a voicemail.
The man identified as Car Tender's owner said he wants to see the East Precinct, which remains boarded up, restored, and called for local officials to "step up and represent their constituents."
"This whole kind of mob thing doesn't work,"' he added, estimating the occupation has cost his business some $55,000 so far.