The elite Republican Guard opened fire at demonstrators in the southern city of Ibb when they were pinned down in a building where they sought refuge after an earlier clash with protesters, opposition sources and witnesses told AFP.
The latest violence took to 179 the number of people killed in anti-Saleh protests gripping the impoverished Arabian Peninsula state in the past three months, according to a toll compiled from activists and medics.
Saleh, a strong US ally in its "war on terror" who has been in power since 1978, vowed on Friday to defend his people "by all means," a day after Washington insisted he agree to a transition plan "now."
"We will defend ourselves with all our forces and by all means," he told large crowds of loyalists in the capital where tens of thousands of opposition activists also rallied to demand his immediate ouster.
Saleh made no direct reference to the United States, but the remarks came a day after Washington asked him to sign a Gulf-brokered transition plan that would see him out of power within a month.
"We will not remain passive in the face of law-breakers," Saleh said, warning the opposition to "stop playing with fire."
Loyalists carried huge portraits of Saleh, and chanted "People want Saleh, People want Saleh", while banners read: "Army is with you."
There was no violence reported in Sanaa.
In a first reaction to Saleh's defiant speech, the spokesman of the parliamentary opposition, Mohammed Qahtan, told the Arab satellite channel Al-Arabiya that the president's remarks amounted to a "declaration of war."
Opposition activists said their latest protests were a show of solidarity with the people of Saada in the north, where Zaidi Shiite rebels are based, while Saleh's supporters marked Friday as a "Day of Unity."
Pro-opposition troops led by dissident General Ali Mohsen al-Ahmar tightened a cordon around University Square, dubbed "Change Square," to protect protesters from attack by Saleh loyalists, witnesses said.
Tension has escalated this week.
In a renewed crackdown, a total of 19 people were killed by troops and gunmen loyal to Saleh in several parts of the country during a 24-hour period ending Thursday.
The escalation came after Yemen's wealthy Gulf Arab neighbours urged all sides in Yemen to sign a transition plan aimed at ending the bloodshed, but Yemen's parliamentary opposition on Friday declared the plan "dead."
"The initiative of the countries of the Gulf Cooperation Council (GCC) is dead," parliamentary opposition spokesman Mohammed Qahtan told AFP. He said Qatar's pullout from the initiative on Thursday signaled its collapse.
Qahtan said the opposition would "intensify the peaceful revolt in coming days and turn it into a civil disobedience movement that will lead to the downfall of the president and bring him and his henchmen to justice."
Qatari Prime Minister Hamad bin Jassem Al-Thani informed GCC chief Abdullatif al-Zayani of his government's decision by phone, Qatar's foreign ministry said on Thursday night.
The decision was based on "indecision and delays in the signature of the proposed agreement" and "the intensity of clashes" in Yemen, it said.
Saleh has stalled by refusing to sign in his capacity as president, insisting on endorsing the agreement only as leader of the ruling General People's Congress, contrary to the demands of the opposition.
The president says that under the constitution he should serve out his current term of office, which expires in 2013.
But Washington on Thursday urged him to sign the deal "now."
The GCC plan proposes the formation of a Yemeni government of national unity, Saleh transferring power to his vice president, and an end to the deadly protests.
The president would submit his resignation to parliament within 30 days, to be followed two months later by a presidential election. He and his top aides would be granted immunity from prosecution.
Meanwhile, suspected Al-Qaeda men on Friday ambushed a military vehicle and killed all five troops on board in the province of Marib, east of Sanaa, a security official said.