More than 120 asylum seekers are in police custody on the Pacific island nation of Nauru after a riot ended with fire destroying most of an Australian-run detention centre.

The fire on Friday evening destroyed all the accommodation blocks, medical facilities and offices and caused about £36 million damage, an Immigration Department spokeswoman said. Only the dining and recreation buildings survived the blaze.

She said 125 asylum seekers remained in police custody today over the riots and blaze. She did not know how many had been charged.

The remaining 420 asylum seekers had been transferred to a second detention camp under construction at another part of the tiny atoll that is home to fewer than 10,000, the spokeswoman said. They are now living in tents.

Eight asylum seekers received hospital treatment following the riot in which protesters hurled rocks at guards and police armed with batons and shields.

Australia pays Nauru and Papua and New Guinea to hold asylum seekers who attempt to reach the Australian shore by boat. Their asylum claims are assessed at the island detention camps.

In a further step to deter future boat arrivals, the government announced that since Friday all bona fide refugees who arrive by boat will be permanently settled in Papua New Guinea, a national of seven million mostly subsistence farmers.

Ian Rintoul, coordinator of Australia's Refugee Action Coalition advocacy group, said asylum seekers could no longer to adequately cared for at Nauru because of the fire and should be brought to Australia.

Mr Rintoul said Friday's protest against delays in asylum claims being processed had been planned throughout last week. The fire had not been planned, he said.

"The Friday night protest was planned to be a breakout and march to the airport then back to the detention centre," Mr Rintoul said.

"What seems to have happened is that there has been far more resistance than had been expected."

Most of the protesters were Iranian, Palestinian, Lebanese and Iraqis, he said.

Clint Deidenang, a resident who witnessed the hour-long riot from the camp fence, told Australian Broadcasting Corporation radio yesterday that up to 1,000 local Nauruan men carrying machetes and steel pipes arrived to help police prevent the asylum seekers from breaking out.

He described the unrest as the biggest riot he had ever seen on the island.