Bloody clashes between protesters and anti-riot police that raged overnight in Cairo's Tahrir Square erupted in new scuffles on Wednesday amid mounting frustration with Egypt's military rulers over the pace of reform.
The health ministry said there were 1,036 injured in the clashes. Those included 120 who were hospitalised and most of whom were later released.
By Wednesday evening calm had been restored in central Cairo as protesters made their way to Tahrir Square - the epicentre of protests that toppled president Hosni Mubarak - in response to calls for an open-ended sit-in to push for reforms.
Dozens were arrested in connection with the clashes, including an American and a Briton, state media reported.
A military source said the two were not among 50 protesters who had been referred to the military prosecution earlier on Wednesday.
Meanwhile, US Under Secretary of State for Political Affairs William Burns called for an "open and inclusive" process in Egypt after talks with Field Marshall Hussein Tantawi, the head of the ruling military council.
Burns said that during talks with officials, he emphasised "American support for an open and inclusive political process in Egypt, the importance of following through on their commitment to lift the emergency law before the elections, the importance of protecting freedom of expression and freedom of assembly."
Hours after bloody overnight clashes, hundreds of angry protesters gathered in front of the interior ministry headquarters in central Cairo, burning tyres and pelting police with stones, a security official said.
Egyptian stocks fell on Wednesday as the clashes raised fears of widespread unrest, with main EGX-30 index closing down 2.03 percent at 5,283.81 points.
Witnesses said the overnight disturbances were some of the most violent in months in the square, which was the focal point of protests that forced veteran president Hosni Mubarak from power in February.
Police fired tear gas and protesters threw stones, amid scenes reminiscent of demonstrations during the uprising.
Protesters accused loyalists of the ousted leader of stirring up the violence after municipal councils they dominated across the country were dissolved by court order on Tuesday.
Activists have called for an open-ended sit-in in the square. The ruling military council warned of a plot to destabilise the country.
The April 6 Movement said a protest to push for democratic reforms that was scheduled for July 8 "will begin today and a sit-in will carry on until there are clear signs that the demands are met."
But the army called on protesters not to give in to "schemes" aimed at sowing chaos.
"The regrettable incidents in Tahrir Square... are designed to destabilise the country and pit the revolutionaries against the police," the Supreme Council of the Armed Forces said.
The clashes "have no reason behind them except to destabilise Egypt's security and stability in accordance with a carefully thought out and organised scheme," the council said.
The interior ministry blamed families of victims killed in the uprising saying some of them stormed a theatre where a memorial service was being held for those who died, which led to clashes with security.
But activists said police beat the families who had been barred from joining the service prompting activists back to the streets.
Nearly 850 people were killed during the popular revolt that brought an end to Mubarak's 30-year rule.
Witnesses told AFP that buses unloaded young men armed with sticks and knives, and accused loyalists of the old regime of stirring up the trouble.
After protests erupted against Mubarak's rule on January 25, the authorities deploying hired thugs in a bid to quell the unrest.
Tuesday's clashes broke out just hours after a Cairo court ordered the dissolution of municipal councils across the country, all of which were dominated by members of Mubarak's now disbanded National Democratic Party.
"I don't think the timing of these clashes is a coincidence," one witness told satellite channel ON TV.
"It came just after the dissolution of the local councils, a decision which I'm sure will make many people (from the old regime) very angry," the witness in Tahrir Square said.
Protesters who first took to the streets to demand the overthrow of Mubarak, have begun to shift their anger to the ruling military council, accusing it of using Mubarak-era tactics to stifle dissent.