Tens of thousands of Yemenis have demonstrated in the capital Sanaa, calling on Ali Abdullah Saleh, president for 30 years, to step down.
This comes after mass protests in Egypt and a popular uprising in Tunisia that ousted its long-time leader.
Yemeni opposition members and youth activists gathered in four parts of the city, including Sanaa University, chanting anti-government slogans.
They also called for economic reforms and an end to corruption.
Yemenis complain of mounting poverty among a growing young population and frustration with a lack of political freedoms.
The country has also been plagued by a range of security issues, including a separatist movement in the south and an uprising of Shia Houthi rebels in the north.
There are fears that Yemen is becoming a leading al-Qaeda haven, with the high numbers of unemployed youths seen as potential recruits for Islamist militant groups.
'Time for change'
Protesters gathered in several locations of the city on Thursday morning, chanting that it was "time for change", and referring to the popular uprising in Tunisia that ousted President Zine al-Abidine Ben Ali earlier this month.
Opposition MP Abdulmalik al-Qasuss, from the al-Islah (Reform) party, echoed the demands of the protesters when he addressed them.
"We gather today to demand the departure of President Saleh and his corrupt government," he was quoted as saying by AFP news agency.
Counter-protests have also been staged by the party of President Saleh, the General People's Congress.
Government supporter Saleh al-Mrani said the dissident protesters were a threat to the country's stability.
"We are against whoever wants to trouble the country's interests. All Yemeni people are against that, and we will prevent any kind of disturbance," he said.
President Saleh, a Western ally, became leader of North Yemen in 1978, and has ruled the Republic of Yemen since the north and south merged in 1990. He was last re-elected in 2006.
Yemenis are angry over parliament's attempts to relax the rules on presidential term limits, sparking opposition concerns that Mr Saleh might try to appoint himself president for life.
Mr Saleh is also accused of wanting to hand power to his eldest son, Ahmed, who heads the elite presidential guard, but he has denied the claims.
"We are a republic. We reject bequeathing [the presidency]," he said in a televised address on Sunday.
The editor-in-chief of the Yemen Post newspaper, Hakim al-Masmari, told the BBC World Service that Yemenis were no longer prepared to put up with widespread poverty.
He said the protests were likely to continue because people felt that "all chances of a dialogue with the ruling party are vanishing".
There have been a series of smaller protests in the lead-up to Thursday's mass demonstrations.
On Saturday, hundreds of Sanaa University students held competing protests on campus, with some calling for President Saleh to step down and others for him to remain in office.
Over the weekend, Yemeni authorities arrested a prominent rights activist, Tawakul Karman, accusing her of organising the anti-government protests. Her arrest sparked further protests in Sanaa.
After her release from prison on Monday, she told CNN that there was a revolution taking place in her country inspired by Tunisia's so-called Jasmine Revolution.
Protests in Tunisia ended 23 years of President Ben Ali's rule and ignited unrest elsewhere in the region, including Algeria and Egypt.