President Mohamed Morsi has ordered the military to maintain security and protect Egypt institutions in the run-up to a controversial referendum on a new constitution.
The army has also been given the power of arrest.
Mohamed Morsi has tried to calm public anger by annulling a decree giving him huge powers, but rejected a call to scrap the 15 December constitutional vote.
Opposition leaders called for protests on Tuesday against the referendum.
The opposition was “not aiming at toppling the president” but wanted a better constitution, said former Foreign Minister Amr Moussa.
Islamist groups have said they will hold counter demonstrations, raising fears of further bloody clashes on the streets of the Egyptian capital.
In another apparent concession, the president suspended a big tax increase on the sale of a variety of goods including soft drinks, cigarettes and beer.
The decision was carried in a statement that appeared on Mohamed Morsi’s Facebook page in the early hours of Monday, state-owned al-Ahram newspaper reported.
As tension increased before Saturday’s referendum, Mohamed Morsi ordered the military to maintain security “up to the announcement of the results from the referendum”, AFP news agency reports.
The step will raise fears that Egypt is moving back towards military rule.
Under the new presidential decree, the military is asked to co-ordinate with the police on maintaining security and is also entitled to arrest civilians.
The police have been seen as weakened since the fall of former President Hosni Mubarak and failed to intervene when anti-Muslim Brotherhood protesters ransacked the Islamist movement’s Cairo headquarters last week, correspondents say.
An increased military presence was visible on Monday close to the presidential palace, which has been the focus of opposition demonstrations. The army has sealed off the area with concrete blocks.
It is not yet clear whether the opposition will boycott Saturday’s referendum. However, a group of senior judges announced on Monday that they would be prepared to oversee the vote, on certain conditions.
Votes in Egypt are traditionally supervised by the judiciary but the November 22nd presidential decree led thousands of judges to go on strike.
Now, with the decree rescinded, the State Council Judges’ Club has agreed to oversee the vote as long as pro-Morsi supporters call a halt to a sit-in outside Egypt’s Supreme Constitutional Court.
The court suspended work on 2 December, citing “psychological pressure” from Islamists who had prevented a meeting on a draft of the new constitution. The protesters had wanted to block a ruling on the legality of the document.
The opposition argues that the constitution was drafted by an assembly dominated by Mohammed Morsi’s Islamist allies.
In a statement after talks on Sunday, the opposition National Salvation Front said it would not recognize the draft constitution “because it does not represent the Egyptian people”.
“We reject the referendum which will certainly lead to more division and sedition,” spokesman Sameh Ashour said.
On Sunday, hundreds of opposition protesters protested against the referendum outside the presidential palace.
They chanted anti-Muslim Brotherhood slogans and held up banners reading slogans such as “Morsi, hold back your thugs” and “The people demand the fall of the regime”.
But Mohamed Soudan, foreign relations secretary of the Muslim Brotherhood’s Freedom and Justice Party, said Mohamed Morsi was constitutionally bound to go ahead with the vote because the date had been announced by the constituent assembly.
The president says he is trying to safeguard the revolution that overthrew Hosni Mubarak last year, but his critics accuse him of acting like a dictator.
Mohamed Morsi’s decree of 22 November stripped the judiciary of any right to challenge his decisions and triggered violent protests.
Although the decree has been annulled, some decisions taken under it still stand.
The general prosecutor, who was dismissed, will not be reinstated, and the retrial of former regime officials will go ahead.
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