Yemen's government put a draft proposal to rebels on forming a technocrat government Saturday, a spokesman said, as fears mount that a new wave of violence could hit the impoverished nation.
A presidential delegation handed the document to representatives of Shiite Huthi rebels, who have camped in their thousands around Sanaa this week, pressing the government to quit.
The presidential committee has been holding talks with rebel commander Abdulmalik al-Huthi in his northern Saada stronghold since Thursday to convince his group to join a new government.
The Shiites have been staging massive protests against a steep hike in fuel prices, with Huthi demanding that the incumbent national unity government step down.
A rebel ultimatum demanding the resignation of the government, headed by Prime Minister Mohamed Basindawa, passed on Friday with the administration still in power.
The government was formed in December 2011 under a transition agreement that paved the way for ex-president Ali Abdullah Saleh's ouster.
"There is a draft agreement and we are waiting for the Huthis to sign and start implementing it in the next hours," presidential team spokesman Abdulmalek al-Mikhlafi told reporters in Saada. A source close to the team told AFP that talks "will be extended and will continue through Sunday".
Mikhlafi said the main points in the accord were to form "a technocrat government within a one-month period from the date of signing the draft document and an economic committee to review the country's economic situation".
Tens of thousands of armed Huthis, also known as Ansarullah, have strengthened their positions around Sanaa over the past week, urging authorities to overturn the fuel hike.
On Friday, thousands of them joined an encampment erected by Zaidi rebels on a road in northern Sanaa leading to the airport and where the interior, communication and electricity ministries are located.
Huthi activist Khaled al-Madani, a leading organiser of the Sanaa sit-in, told AFP: "We are not concerned by the presidential delegation or by any agreements.
"What we care about is achieving the demands we took to the streets for: overthrowing the government and revoking of the decision" to raise fuel prices. Madani reaffirmed earlier Huthi pledges that protests would remain "peaceful".
Yemen's security and military committee, however, "condemned" at a meeting Friday the "dangerous escalation" by the rebels that "violate the right of peaceful expression and demonstration."
The new encampment "threatens security", the committee said in a statement on the official Saba news agency.
Late Friday, authorities stepped up security around the interior ministry, just 100 metres (yards) from the Huthi encampment. Armoured vehicles were deployed and new checkpoints set up around the compound.
On Saturday, a rival protest took place in the province of Dhammar, south of Sanaa, with thousands demonstrating in support of the government. Activists called for a similar rally to take place in the capital on Sunday.
The Huthis' movement has raised fears of a new wave of violence in Yemen, which is in political transition at a time of an Al-Qaeda insurgency and a southern separatist campaign.
President Abdrabuh Mansur Hadi on Thursday urged the armed forces to "raise their level of vigilance".
The Zaidi rebels have opposed the government's plans for a six-region federation, and demanded a single region for the northern highlands and a greater share of power in the federal government. They control Saada province in the far north and parts of several neighbouring provinces.
Rebels reached the outskirts of Sanaa in July after seizing Amran to its north, although they later agreed to withdraw. Ansarullah has been fighting an on-off conflict with government troops in Yemen's northern mountains for the past decade.
The Zaidi Shiites, a minority in mainly Sunni Yemen, form the majority in the northern highlands, including the Sanaa region.