The incident begun in the early hours of Saturday morning when rampaging youths stoned a tramway and attacked it with baseball bats and iron bars.
The gangs then set cars on fire and opened fire against officers. The officers returned fire.
Regional security official Brigitte Julien says no one was injured in the incident but one youth, in his twenties, was detained.
The riots came after the death of a Grenoble resident during a robbery in a nearby town.
Karim Boudouda, 27, was one of two men believed to have held up a casino, escaping with more than 20,000 euros (£17,000).
He was killed in a shoot-out with police following the robbery. Violence flared after his memorial service.
Mr Boudouda, 27, had three previous convictions for armed robbery. The other suspect escaped and is still on the run.
Interior Minister Brice Hortefeux was planning to travel to the town to monitor events.
The riot in Grenoble recalled civil unrest that exploded across France in late 2005 after two teenagers from a rough Parisian suburb died as they were fleeing police.
The deaths touched off almost three weeks of riots across the country, often in the rough suburbs that ring France’s major cities.
These high-rise neighbourhoods, built in the 1950s and 1960s to house a growing population of industrial workers and immigrants, have become near-ghettos where unemployment is high, public services are poor, and resentment boils.
During the 2005 riots, some 300 buildings and 10,000 cars were burned, while 130 police and rioters were hurt.
Since then, unrest has flared often after residents have run ins with the police.
Police and government officials have a lingering fear that the poor suburbs could explode again because the underlying causes–high unemployment, few opportunities, drug trafficking and a sense of exclusion from society–have changed little.
Police unions have raised concerns about a rise in violent crime spurred by the recession and a resurgence of drug trafficking in some areas.