Hooligans started throwing bottles and chairs at police around 1:30 a.m. (00.30 GMT) in the same area of bars and restaurants in this coastal town where hundreds of soccer fans, many wearing England shirts, rioted the previous night, police and eyewitnesses said.
Police captain Manuel Jorge of the GNR paramilitary force told Reuters 20 people had been taken into custody and by 4 a.m. (0300 GMT) the area was quiet.
One of those held needed hospital treatment for facial injuries, Jorge said. He had no word of other injuries and no immediate confirmation of the nationality of those detained.
"But we believe they are mostly English," he said.
"The trouble was no worse than last night even though there were more detentions," Jorge added. "Police on the spot estimated there were 300-400 people involved, but the situation is now calm."
The street of bars and clubs, many offering English fare, had been lively but peaceful during the evening as England fans mingled with Dutch supporters watching the Netherlands' 1-1 draw with Germany on big screens and televisions.
CHANTING FANS
Gangs of youths began arriving after midnight and the street soon filled with chanting revellers
Then groups of people, many wearing England shirts, started throwing bottles and chairs at police who replied by calling for reinforcements in riot gear, with dogs and on horseback.
Eyewitnesses said missiles were also thrown at a group of photographers and a camera was smashed.
Lines of police moved into the crowd using batons to disperse them and there were running battles along the street.
Police ordered the public away from the area and closed the restaurants and cafes, cordoning off the street.
Police then began mopping up operations in side streets and were continuing to patrol, Jorge said.
Twelve people detained during violence early on Tuesday were due to appear in court later on Wednesday. The 12 include 10 Britons, a Russian and a Portuguese.
The England squad at Euro 2004 are based nearly 300 km from the Algarve, but many fans have chosen to stay on the southern coast, a popular destination for British holidaymakers.
England fans have a reputation for hooliganism and caused trouble both in France during the World Cup in 1998 and in Belgium at the last European Championship in 2000.
UEFA football's governing body has warned the English FA that the national team could be banned from competition if fans cause trouble.