Pro-democracy protesters in Egypt are calling for "millions" to take to the streets across the country in what could become the largest protests so far, a day after President Hosni Mubarak repeated his refusal to step down.
Massive crowds gathered in Tahrir Square ahead on Friday, chanting "the army and the people are one, hand in hand".
In a statement read out on state television at midday, the military announced that it would lift a 30-year-old emergency law but only "as soon as the current circumstances end".
The military said it would also guarantee changes to the constitution as well as a free and fair election, and it called for normal business activity to resume.
Many protesters had anticipated a much stronger statement. Al Jazeera's Sherine Tadros, reporting from Tahrir Square, said people there were hugely disappointed and vowed to take the protests to "a last and final stage".
"They're frustrated, they're angry, and they say protests need to go beyond Liberation [Tahrir] Square, to the doorstep of political institutions," she said.
Protest organizers have called for 20 million people to come out on "farewell Friday" in a final attempt to force Mubarak to step down.
Before Thursday's announcement in which the president said he was determined to stay in power, demonstrators had planned to hold a "Friday of martyrs" to commemorate the 300 or more who have been killed since protests began on January 25.
'Incredible scene'
Al Jazeera's Hoda Abdel Hamid said the side streets leading into Tahrir were filling up with crowds.
"It's an incredible scene. From what I can judge, there are more people here today than yesterday night.
"The military has not gone into the square except some top commanders, one asking people to go home ... I don't see any kind of tensions between the people and the army but all of this might change very soon if the army is seen as not being on the side of the people."
Hundreds of thousands were participating in Friday prayers outside a mosque in downtown Alexandria, Egypt's second biggest city.
Egyptian television reported that large angry crowds were heading from Giza, adjacent to Cairo, towards Tahrir Square and some would march on the presidential palace.
Mubarak said he was handing "the functions of the president" to Vice-President Omar Suleiman but the move means he retains his title of president.
"I have decided to stick... by my responsibility in protecting the constitution and the people's interests until the power and responsibility are handed over to whomever the voters chose next September, in free and fair elections," the president said in a televised address.
Halfway through his much-awaited speech late at night, anticipation turned into anger among protesters camped in Tahrir Squarewho began taking off their shoes and waving them in the air.
‘Go home'
Immediately after Mubarak's speech, Suleiman called on the protesters to "go home" and asked Egyptians to "unite and look to the future."
"Youth of Egypt, heroes of Egypt, go back to your homes and businesses. The country needs you so that we build, develop and create," Suleiman said.
"Do not listen to tendentious radios and satellite televisions which have no aim but ignite disorder, weaken Egypt and distort its image."
More than 1,000 protesters moved overnight towards the presidential palace in the upscale neighborhood of Heliopolis in central Cairo.
About 200 of them were there at Friday midday, chanting anti-Mubarak slogans while military commanders behind barbed wire guarded the palace, where several tanks have been deployed.
Thousands of protesters have also been surrounding the radio and television building in Cairo, which they see as a mouthpiece for Mubarak's regime.
Union workers have joined the protests over the past few days, effectively crippling transportation and several industries, and dealing a sharper blow to Mubarak’s embattled regime.
The US and EU said the announcement to transfer some powers to the vice-president was grossly insufficient and falls short of genuine reforms demanded by the people.
"The Egyptian people have been told that there was a transition of authority, but it is not yet clear that this transition is immediate, meaningful or sufficient," Barack Obama, the US president, said in a statement.
Mohamed ElBaradei, a leading opposition figure, said Egypt "will explode" as a result of Mubarak's defiance and called on the Egyptian army to intervene "to save the country."
PHOTO CAPTION
Egyptian anti-government demonstrators flood Cairo's landmark Tahrir Square early on Friday, February 11, 2011.
Al-Jazeera