A Pakistani court on Friday ordered Raymond Davis to be held in prison for another 14 days, pending a legal battle over whether he has diplomatic immunity. Washington says he is a diplomat and demands his immediate release.

Up to 500 people rallied outside the headquarters of Pakistan's main Islamic party, Jamaat-e-Islami (JI), in the eastern city of Lahore, shouting "Hang Davis," "US terrorism in Pakistan unacceptable" and "Friends of America are traitors".

In the southern port city of Karachi, activists from JI and its youth wing Pasban held two rallies, burning an American flag and chanting "Death to Davis, death to America".

On January 27, Davis shot two Pakistani men and told police he acted in self-defence because he feared they were trying to rob him.

The US consulate general in Lahore sent a vehicle to recover Davis, but it ran over and killed a third Pakistani man before fleeing the scene.

US lawmakers have threatened to cut payments to Pakistan, the beneficiary of $7.5 billion dollars of aid and $2 billion in military aid, and Washington has warned that high-level dialogue is at risk unless Davis is freed.

"We are deeply disappointed over threats by the US government," senior JI leader Liaqat Baloch told the rally.

"The Raymond Davis incident has exposed the true face of America and has exposed Blackwater, which is behind bomb blasts on sacred Muslim places and shrines," Baloch alleged.

Blackwater is the former name of a US private security company, now called Xe Services, which was accused of firing on Iraqi civilians in 2007.