Riots sparked in the small town of Oakkan, around 100 kilometers north of the capital Yangon, on Tuesday when a woman accidentally knocked into a young monk, authorities said, amid acute tensions following a series of attacks in March.
Terrified villagers said police were not there to protect them when a crowd attacked a local mosque on Tuesday evening in Mie Laung Sakhan village.
"About 200 to 300 people arrived in our village on motorcycles and destroyed the mosque. All the villagers ran away. We were scared and didn't resist. They destroyed until they were satisfied," a villager said.
Authorities have arrested 18 people after some 77 homes in four villages in the region north of the commercial hub Yangon were burned during a spate of arson on Tuesday evening, president's spokesman Ye Htut said in a Facebook update.
The village mosque was seriously damaged and around 10 homes burned, according to an AFP journalist at the scene. No security presence was visible until late morning, when about 30 police arrived.
A heavy security presence was visible on Wednesday morning in Oakkan, where some 30 shops in the market had been destroyed and a mosque damaged.
Unrest has exposed deep fractures in formerly junta-run Myanmar and cast a shadow over reforms under a quasi-civilian regime that took power two years ago.
At least 43 people were killed and thousands were left homeless in March, which saw some monks involved in clashes.
Rights groups have accused authorities of standing by during previous attacks on Muslims or actively participating in some cases. The government rejects allegations that it is complicit in the violence.