The standoff came after days of clashes between locals and police.
Police say the school is linked to the radical cleric Abu Bakar Bashir, who was jailed for 15 years last month for funding a terrorist group planning attacks against Westerners and Indonesian political leaders.
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On Tuesday police shot and wounded several people in a group of about 300 who were carrying wooden sticks, stones and arrows.The group was protesting against the police for performing an autopsy on the body of an alleged bomb maker, Firdaus, who died in an explosion at the school in Bima, West Nusa Tenggara province, on Monday.
Local media said police suspected the man of instructing students on how to make bombs when one of the devices exploded.
After the blast, hundreds of students and teachers blocked the entrance, preventing police and soldiers from investigating.
''We tried to open street blockage and incidents took place,'' a spokesman for West Nusa Tenggara police said.
Police delivered the body to Dompu, Firdaus's home village, and he was buried on Tuesday night, the spokesman said.
Provincial police spokesman Sukarman Husein said that about 200 police and troops had been deployed around the school.
Eight people were in custody in connection with the incident, Mr Sukarman said.
Religious Affairs Minister Suryadharma Ali said the police had to take strong action if the school was linked to extremist groups. ''If anyone related to the bomb blasts is found to be a member of a radical group, then the boarding school must be closed and the students must be reguided,'' the Jakarta Globe quoted Mr Suryadharma as saying.
He said the school had in the past resisted government attempts to moderate its teachings.
One of the school's leaders was reportedly arrested last year in connection with the terror group Bashir was convicted of funding.
A student, Saban Arohmah, was arrested last month for killing a police officer, the Kompas news website said.
AFP, with TONI O'LOUGHLIN
Read more: http://www.theage.com.au/world/siege-ends-at-islamic-school-20110713-1hdzj.html#ixzz1S3fYjogU
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