The king of Bahrain has gone on television to announce an investigation into the deaths of two protesters killed in clashes with security forces.
On Tuesday, a mourner was shot dead at the funeral of a protester killed when police fired a barrage of tear gas and rubber bullets in the capital, Manama.
Hamad bin Issa Al Khalifa offered his condolences to the men's families.
But soon after, thousands of protesters gathered in Manama's main square. The security forces have so far held back.
The disturbances in Bahrain - where the Shia majority has been ruled by a Sunni Muslim royal family since the 18th Century - are the latest in the wave of anti-government unrest that has swept the Middle East.
'Reform will not stop'
In a rare national TV address on Tuesday, Sheikh Hamad expressed regret about the recent fatalities and announced a ministerial probe.
"There have sadly been two deaths. I express my deep condolences to their families," he said.
"Everyone should know that I have assigned Deputy Prime Minister Jawad al-Urayyid to form a special committee to find out the reasons that led to such regrettable events," he added.
Mr Urayyid is a long-serving Shia member of Bahrain's government, which is dominated by members of the king's family.
Sheikh Hamad also promised to continue the reforms he has instigated since the emirate became a constitutional monarchy in 2002.
"Reform is going ahead. It will not stop," he said.
Following the address, thousands of protesters gathered in Pearl Square in central Manama. Some said more than 10,000 people were there.
Many in the crowd waved Bahraini flags and chanted: "No Sunnis, no Shia. We are all Bahrainis".
Police were deployed on the other side of a bridge leading to the square, but took no futher action
The Bahrain Youth Society For Human Rights said many of the protesters had brought tents, blankets and carpets so they could camp overnight.
The group also said the country's internet supply was being restricted to hamper the uploading of videos and pictures from the protests.
The demonstrators said they wanted political prisoners to be released, more jobs and housing, the creation of a more representative and empowered parliament, a new constitution written by the people, and a new cabinet that does not include Prime Minister Sheikh Khalifa bin Salman Al Khalifa, who has been in office for 40 years.
Earlier, 31-year-old Fadel Salman Matrouk died after being shot with a "hollow-point bullet" in front of the Salmaniya Medical Complex in Manama, Shia opposition MP Khalil al-Marzuq told the AFP news agency.
However, officials at the hospital told the Associated Press that he had been hit by buckshot fired during the funeral.
He was among a crowd of more than 2,000 mourners at the funeral of Ali Abdulhadi Mushaima, 21, who died after being hit by a rubber bullet during clashes on Monday in the village of Daih.
The demonstrators had been marching to Manama to demand greater political rights. At least 25 people were reportedly hurt by rubber bullets, buckshot and tear gas fired by the security forces, witnesses said.
Following Mr Matrouk's death, a leader of the country's main Shia Islamist opposition bloc, the Islamic National Accord Society, also known as al-Wifaq, told BBC Arabic that it had decided to boycott parliament in protest at "the brutal practices" of the security forces.
"I have participated in many demonstrations. All of them were peaceful and their slogans were peaceful. I'm now walking in the funeral of the first martyr and the second one is still in the morgue," Abu Jalil Ibrahim said.
"All our demands are legitimate. The people want to participate in the decision making process through an elected council and a constitution."
"So, why do they use banned weapons and kill innocent people?"
Since independence from the UK in 1971, tensions between the Sunni elite and the less affluent Shia have frequently caused civil unrest. Shia groups say they are marginalised, subject to unfair laws, and repressed.
The conflict lessened in 1999 when Sheikh Hamad became emir. He freed political prisoners, allowed exiles to return, and abolished a law permitting the government to detain individuals without trial for three years.
He also began a cautious process of democratic reform. In 2001, voters approved a National Action Charter that would transform Bahrain into a constitutional monarchy. The next year, Sheikh Hamad proclaimed himself king and decreed that a National Assembly be formed.
There was also greater protection of democracy and human rights. Although political parties were banned, "political societies" could operate.
Landmark elections were held in 2002, but the opposition boycotted them because the appointed upper chamber of parliament, the Shura Council, was given equal powers to the elected lower chamber, the Council of Representatives.
They also said the government had drawn electoral districts which diluted the Shia community's voting strength, and given voting rights to residents from Sunni Gulf states and foreigners in the mainly Sunni security forces.
In the last election in November, government supporters retained a slight majority in the 40-seat Council of Representatives. Wifaq won 18 seats.
Prior to the poll, media freedoms were curtailed and hundreds of Shia were arrested. Twenty-five, including a prominent blogger, were subsequently charged with plotting to overthrow the government, resorting to terrorism and financing terrorist activities.
Shortly after Egyptian President Hosni Mubarak was forced to step down last Friday, Sheikh Hamad appeared to attempt to defuse Shia discontent by ordering a $2,650 payment to every Bahraini family.
The BBC's Kevin Connolly says Bahrain has a close relationship with the US and the US Fifth Fleet has its home there - a factor which guarantees that Washington will be watching events in the kingdom closely.