Squatters threw stones and a Molotov cocktail at police, who arrested two people, a law enforcement spokeswoman said in an email, adding that all the squatters had been evicted.
Live television images showed police using riot shields and pepper spray. Smoke could be seen rising from the large 1950s building located in Rio's affluent Flamengo area with views over Guanabara Bay.
Batista leased the building from the Flamengo soccer club and planned to invest millions to turn it into a five-star hotel. But as his oil and mining companies began to collapse in 2013 due to missed production targets and mounting debt, the Rio-based tycoon was forced to cancel Olympics-related projects all over the city.
The graffiti-covered building had been empty for years. Last week, about 100 homeless people broke into it and began squatting there.
The failed hotel conversion has added to Rio's struggles to accommodate the estimated 400,000 visitors expected to arrive for the Olympic Games next year.
(Reporting by Stephen Eisenhammer; Editing by Lisa Von Ahn)
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