Egyptian president Hosni Mubarak says he is transferring power to his vice president, Omar Suleiman, but will not leave the country.
Mr Mubarak said in a nationally televised address that the demands of protesters calling for his immediate resignation are just and legitimate.
He said he has requested six constitutional amendments, answering one of the demands of the protesters.
He said he will lift hated emergency laws when security permits it.
Mr Mubarak also vowed to punish those behind violence over the past two weeks and offered condolences to the families of those killed.
However, the move means he retains his title of president and ensures regime control over the reform process, falling short of demonstrators' demands.
Protesters in Cairo's central Tahrir Square, hoping he would announce his resignation outright, watched his speech in stunned silence, slapping their hands to their foreheads in anger, some crying or waving their shoes in the air in a sign of contempt.
After he finished, they resumed their chants of "Leave! Leave! Leave!"
"I have seen that it is required to delegate the powers and authorities of the president to the vice president as dictated in the constitution," Mr Mubarak said near the end of the 15-minute address on state TV.
The article is used to transfer powers if the president is "temporarily" unable to carry out his duties and does not mean his resignation.