A concession offered by President Mohamed Morsy failed to placate opponents who accused him on Sunday of plunging Egypt deeper into crisis by refusing to postpone a vote on a constitution shaped by Islamists.
Islamists say they see the referendum as sealing a democratic transition that began when a popular uprising toppled Hosni Mubarak 22 months ago after three decades of military-backed one-man rule.
Their liberal, leftist and Christian adversaries say the document being fast-tracked to a vote could threaten freedoms and fails to embrace the diversity of Egypt's 83 million people.
More protests were planned near Morsy’s palace, despite tanks, barbed wire and other barriers installed last week after clashes between Islamists and their rivals killed seven people.
Morsy had given some ground the previous day when he retracted a fiercely contested decree giving himself extra powers and shielding his decisions from judicial review.
But the president insisted the constitutional referendum go ahead next Saturday and the Muslim Brotherhood, from which he sprang, urged the opposition to accept the poll's verdict.
Ahmed Said, a liberal leader of the main opposition National Salvation Front, described the race to a referendum as "shocking" and an "act of war" against Egyptians.
The front has promised a formal response later on Sunday.
Egypt is torn between Islamists, who were suppressed for decades, and their rivals, who fear religious conservatives want to squeeze out other voices and restrict social freedoms. Many Egyptians just crave stability and economic recovery.
Brotherhood spokesman Mahmoud Ghozlan said the scrapping of Morsy's decree had removed any reason for controversy.
"We ask others to announce their acceptance of the referendum result," he said on the group's Facebook page, asking whether the opposition would accept "the basics of democracy."
The retraction of Morsy's 22 November decree, announced around midnight after a "national dialogue" boycotted by almost all the president's critics, has not bridged a deep political divide.
Prime Minister Hesham Qandil, a technocrat with Islamist leanings, said the referendum was the best test of opinion.
"The people are the makers of the future as long as they have the freedom to resort to the ballot box in a democratic, free and fair vote," he said in a cabinet statement.
‘Constitution without consensus’
But opposition factions, uncertain of their ability to vote down the constitution against the Islamists' organizational muscle, want the document redrafted before any vote.
"A constitution without consensus can't go to a referendum," said Hermes Fawzi, 28, a protester outside the palace. "It's not logical that just one part of society makes the constitution."
Egypt tipped into turmoil after Morsy grabbed powers to stop any court action aimed at hindering the transition. An assembly led by the Muslim Brotherhood and other Islamists then swiftly approved the constitution it had spent six months drafting.
Opponents, including minority Christians, had already quit the assembly in dismay, saying their voices were being ignored.
A leftist group led by defeated presidential candidate Hamdeen Sabbahi demanded the referendum be deferred until a consensus could be reached on a new draft, saying there could be "no dialogue while blood is being spilled in the streets."
After the dialogue hosted by Morsy, a spokesman announced that the president had issued a new decree whose first article "cancels the constitutional declaration" of 22 November. He said the referendum could not be delayed for legal reasons.
The decree ignited more than two weeks of sometimes bloody protests and counter-rallies in Egypt. Morsy's foes have chanted for his downfall. Islamists fear a plot to oust the most populous Arab nation's first freely elected leader.
The April 6 Youth Movement, prominent in the anti-Mubarak revolt, derided the result of Saturday's talks as "manipulation and a continuation of deception in the name of law and legitimacy."
Islamists reckon they can win the referendum and, once the new constitution is in place, a parliamentary poll about two months later. The Islamist-led lower house elected this year was dissolved after a few months by a court order.
Investors appeared relieved at Morsy's retraction of his decree, sending Egyptian stocks 4.4 percent higher on Sunday. Markets are awaiting approval of a US$4.8 billion IMF loan later this month designed to support the budget and economic reforms.
The military, which led Egypt's transition for 16 turbulent months after Mubarak fell, told feuding factions on Saturday that only dialogue could avert "catastrophe." But a military source said these remarks did not herald an army takeover.