Attacks against Muslims -- who make up at least four percent of the population -- have exposed deep rifts in Buddhist-majority Myanmar, casting a shadow over widely praised political reforms since military rule ended in 2011.
The latest violence is the first anti-Muslim incident reported in Sagaing amid signs that the unrest is continuing to widen.
It began in the far west of Myanmar last year and has erupted in areas across the country since bloody riots in the central town of Meiktila killed dozens in March.
Last week watchdog Physicians for Human Rights said Myanmar risked "catastrophic" levels of conflict with "potential crimes against humanity and/or genocide" if authorities failed to stem anti-Muslim hate speech and a culture of impunity around the clashes.
Rights groups have accused authorities of being unable or unwilling to contain the unrest, which has left about 250 people dead and more than 140,000 homeless. Myanmar has rejected the claims.
Many of the incidents have featured retaliatory violence against Muslim communities in response to accusations of seemingly isolated criminal acts.
A regional police official, who asked not to be named, said the latest conflict broke out after the Muslim suspect allegedly approached a 25-year-old woman, "grabbed her hand and attempted to rape her".
No injuries have been reported in the violence, but the ministry statement said at least 20 homes were destroyed as well as over a dozen shops and a local rice mill.
Ten fire engines battled the blazes and the ministry said security had been stepped up since early Sunday "to restore peace there".
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