Government forces attacked an opposition protest camp in Sanaa overnight after President Ali Abdullah Saleh returned to Yemen from a three-month absence and at least 17 protesters and soldiers were killed.
Hundreds fled from the midnight raid on the "Change Square" camp and mortar and sniper fire continued through the morning.
Protesters said the attacking forces included the elite Republican Guard and Central Security forces.
Interior Minister Muttahar al-Masri however denied that a raid took place, blaming the gunfire on "extremists".
President Saleh, who went to neighbouring Saudi Arabia for medical treatment in June for wounds suffered in an assassination attempt, said he wanted a truce to end days of fighting in the capital.
This would allow peace talks to take place, he said.
He was also quoted by state news agency Saba calling for the capital of Sanaa to be cleared of "all armed elements" and for checkpoints and barriers to be removed.
Protesters in the opposition encampment on the 4km stretch of avenue they have dubbed "Change Square" said some buildings and tents were on fire and that protesters had retreated by about 500 metres.
