Eight police officers have been questioned over the shooting incident in Kisumu that led to the death of a 19-year-old student on Tuesday.
Three other residents are nursing gunshot wounds.
The Independent Policing Oversight Authority has taken over the case.
County police commander Alphonce Wambua said the authority will ensure that justice is served and action taken against the officers found culpable.
"The DCI took their statements on Tuesday and IPOA has taken over the case and is also recording statements from the officers," he said.
Wambua said various people who witnessed the incident have given their statements.
Silas Omondi, a mechanic in Jua Kali area, Kisumu, was shot in the right leg and is at Jaramogi Oginga Odinga Teaching and Referral Hospital.
Kevin Ochieng, a boda boda rider, and James Were, were shot in the arms and back respectively. They are recuperating at Kisumu county hospital.
Trouble started when police officers pursuing a PSV vehicle near Jua Kali area threw spikes on the road to stop the matatu.
However, when the matatu failed to stop, the officers allegedly fired teargas and allegedly fired live bullets, hitting passersby.
Angry residents blocked Aga Khan road before storming Kisumu Central police station, demanding action be taken against the officers involved in the shooting.
Kisumu Central MP Joshua Oron condemned the incident, saying police brutality will not be condoned within the city.
"I want to tell the police boss that we will not allow our people to be brutally murdered. The people shot are not among those who were involved in the traffic incident within the Jua Kali area but innocent people going about their businesses," the legislator said.
Kisumu Resident Voice Association chairman Audi Ogada said the role of police officers in enforcing the traffic rules is clearly defined in the National Police Service Act and there is no section indicating that a police officer should use a live bullet.
"At night we are being terrorised by criminals, during the day it is the police officers. Where will we go as Kisumu people?" he said.