Egypt's new military authorities say they are dissolving parliament and suspending the constitution.
In a statement on state TV, the higher military council said it would stay in power six months, or until elections.
Egypt's current parliament is dominated by supporters of President Hosni Mubarak, who was ousted on Friday after 18 days of mass protests.
Earlier there were scuffles in Cairo's Tahrir Square as protesters thwarted army efforts to remove them.
The military police chief has called for tents to be cleared from the area, the focal point of the uprising that led to Mr Mubarak's departure.
The BBC's Wyre Davis in Cairo says the situation on the square has become a good-natured standoff, but protesters have vowed to stay night after night.
Also, disruption caused by public sector strikes has prompted the central bank to declare an extra bank holiday on Monday.
Correspondents say employees have been emboldened by the success of protesters and are now seeking the removal of bosses they blame for what they consider to be huge earnings gaps in their companies.
A statement was read out on state TV on Sunday from the higher military council, saying it would suspend the constitution and set up a committee to draft a new one, before submitting it to a popular referendum.
'Victory for revolution'
The current constitution has prevented many parties and groups from standing in elections, leaving Egypt with a parliament packed with supporters of the National Democratic Party, loyal to Mr Mubarak.
Our correspondent says the new announcement means elections could be held in July or August, instead of in September as planned.
By making another important statement and providing more details of how the future state will look, he adds, the military should satisfy protesters still sceptical about the pace of change.
The opposition's Ayman Nour, who challenged Mr Mubarak for the presidency in 2005, described the military leadership's steps as a "victory for the revolution", Reuters news agency reported.
Meanwhile, caretaker Prime Minister Ahmed Shafiq said his main priority was to restore the country's security.
Speaking earlier at a news conference, he said: "Our main concern now as a cabinet is security - we need to bring back a sense of security to the Egyptian citizen.
"Parallel to that we also want to ensure that the daily life of all Egyptians goes back to normal and that basic needs like bread and healthcare are available."
He said that the country had enough reserves to weather the economic crisis, but that if instability continued there could be "obstacles".
"Our internal economic position is solid and cohesive," he said.
He also pledged to "return rights to the people and fight corruption".
Tempers frayed on Sunday morning as protesters realised hundreds of policeman - who had become hugely unpopular for their violent attempts to suppress the uprising - had entered the square.
For a few minutes there was a tense stand-off as the two sides confronted each other, before the police march peeled away and left the square.
Although there were reports of scuffles between soldiers and die-hard protesters in the square on Sunday morning, our correspondent said the operation to clear the area had previously been conducted gently.
A hardcore of several hundred protesters had remained marooned on a traffic island in the heart of the square, saying they would not move until a full timetable of reform was drawn up.
Throughout the weekend, an army of volunteers and municipal workers has cleared away debris from the streets.
Meanwhile, it has emerged that 18 antiquities have been stolen from the Egyptian Museum during the unrest.
The Antiquities Ministry said they included a gilded wood statue of Tutankhamun being carried by a goddess and parts of another statue of him harpooning.
Earlier, Mr Obama welcomed the new military leadership's statement aired on state TV on Saturday, which implicitly confirms that the country's 1979 peace treaty with Israel will remain intact.
Israeli PM Benjamin Netanyahu also welcomed the announcement, saying the treaty was a cornerstone of Middle East stability.
The demonstrations were triggered by widespread unrest over unemployment, poverty and corruption.
Meanwhile, the authorities imposed travel bans on three senior officials close to Mr Mubarak.
They said former Prime Minister Ahmed Nazif, former Interior Minister Habib al-Adli and current Information Minister Anas al-Fekky were under investigation.
Mr Mubarak resigned on Friday after 18 days of protests, and was flown to his luxury residence in the Red Sea resort of Sharm el-Sheikh.
Mr Shafiq said on Sunday that the former president was still in the resort, despite rumours that he had fled the country.
UK Business Secretary Vince Cable has urged international co-operation to track down any illegal assets held by Mr Mubarak.
Switzerland has announced a freeze on any assets held by the former president, and the UK government is under pressure to do the same.