An Indian man in his 20s was allegedly set upon by a group of men of Middle Eastern appearance, and another Indian was injured in a separate attack.
At least 200 Indian men then gathered, shouting demands for "justice".
The latest incidents come after several attacks on Indians, which the government denies are racist.
A heavy police presence remained watching the angry crowd until the early hours of Tuesday morning.
"And the Lebanese hit them Indians very badly... in the stomach and in the head," Reuters TV quoted an unidentified witness to the attack.
Three Lebanese men were then allegedly assaulted by members of the angry Indian crowd and sustained minor injuries, in what is believed to be a retaliation attack.
Indian men in the crowd said they were angry at the lack of government interest in their plight.
Ostrich problem?
Opinion appears split in Australia over whether the recent spate of attacks on Indians are racist, or, as police have said, a product of some people being "easy targets" if out alone at night.
The Sydney Morning Herald reported a councillor for Parramatta in Sydney, Michael McDermott, accusing the police of naivety if they believe the attacks had nothing to do with racism.
Mr McDermott said there was rising tension in the multi-ethnic area.
"There is an element of racial targeting and to not think that would be burying our heads in the sand a wee bit," he said.
The latest incident comes after a petrol bomb was hurled through the bedroom window of a 25-year-old Indian hospitality graduate, and a violent attack on two Sinhalese men last month. There has also been a wave of assaults on Indian students in Melbourne in the past year.
Superintendent Robert Redfern, the Parramatta Local Area Commander, told ABC Radio he believed the attacks had nothing to do with race and were instead caused by the victims' work patterns.
Prime Minister Kevin Rudd has publicly reassured the Indian government that Australia is not a racist country.
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