A crowd of about 70 - 100 people threw 12 to 15 petrol bombs as well as bricks, fireworks and bottles in the Corcrain Road and Charles Street areas overnight.
Three people were arrested and 19 baton rounds were fired by police.
The rioters attacked police land rovers with sledgehammers.
Local people said the violence flared after loyalist flags were removed close to a peace line.
Police said a planned peaceful protest had been hijacked by a minority.
Mayor of Craigavon Councillor Alan Carson condemned the violence and appealed for calm.
"This does not do anyone any good," he said.
"People have a right to live peacefully and feel safe in their own homes. The violence we witnessed last night was something that we had hoped we had assigned to the history books.
"I would appeal to those members of the community to respect the law and not to take their frustrations out on innocent members of the public."
Sinn Fein's John O'Dowd said a number of foreign national families fled their homes in the trouble.
"They packed their bags, so distressed were they at the violence," he said.
"Their neighbours tried to reassure people that they would be safe in their homes but they left."
Alliance councillor Sheila McQuaid said: "I am disgusted at the activities of those involved in this disorder. I would appeal for people to act responsibly.
"This type of incident is deeply damaging and we need to ensure stability to help us grow our economy.
