The armed forces high command had earlier issued "Communique No.1", declaring it was taking control of the nation in what some called a military coup seeking to end the turmoil under the 82-year-old former general, who has ruled for 30 years.
"Leave! Leave!" chanted hundreds of thousands who had gathered in Cairo's Tahrir Square in anticipation that a televised address would be the moment their demands were met.
Instead, the former air force commander portrayed himself as a patriot and war hero overseeing an orderly transition until an election in September -- in which he said last week he would not stand. Mubarak praised young people who have stunned the Arab world with unprecedented rallies. He offered constitutional change and a bigger role for Vice President Omar Suleiman.
Waving shoes in the air in a dramatic Arab show of contempt, the crowds in central Cairo chanted: "Down, down Hosni Mubarak."
Asked if Mubarak would step down, an Egyptian official had told Reuters before the speech: "Most probably". But his information minister had said that would not be the case.
Joy turned to despair and then to anger.
Mohamed ElBaradei, a Nobel peace prize winner and retired U.N. diplomat who runs a liberal political movement, wrote on Twitter: "Egypt will explode. Army must save the country now."
DELEGATING POWERS
In a 20-minute address in which he said he would not bow to foreign pressure -- Washington has called on its old ally to make way quickly -- Mubarak said he would "delegate to the vice president of the republic the prerogatives of the president of the republic in a manner that is fixed by the constitution".
Egypt's ambassador to Washington said Mubarak had passed "all authority" to Suleiman, who was now "de facto president" while Mubarak remained head of state "de jure" -- in formal law.
But Hassan Nafaa, an Egyptian analyst and government critic, said: ""Mubarak still holds the reins to power and he can easily and at any time retrieve presidential powers from Suleiman."
Suleiman, a 74-year-old former intelligence chief who was promoted just last month, is not widely popular with protesters who are seeking a complete break with the military-dominated system that has governed Egypt for the past six decades.
Suleiman appeared on state television to say there was a "road map" for transition and said he would oversee a "peaceful transition of power" in the Arab world's most populous nation.
Egypt's sprawling armed forces -- the world's 10th biggest and more than 468,000-strong -- have been at the heart of power since army officers overthrew the British-backed king in 1952.
The army, from politically plugged-in generals to poor conscripts and junior officers, is key to what happens next.
"This poses a real dilemma for the army," said Rosemary Hollis at London's City University. "Are they going to allow the demonstrators to escalate their demonstrations so that they push the point that Mubarak has got to go, and that means the army definitely does split with Mubarak? The demonstrators are very disappointed and there will be violence."
Robert Springborg of the U.S. Naval Postgraduate School called Mubarak and Suleiman's speeches "enormously provocative", made by "desperate men, willing to gamble the fate of the nation for their own personal interest".
"The speeches ... are not intended to bring an end to the crisis in a peaceful way but to inflame the situation so there is justification for the imposition of direct military rule. They are risking not only the coherence of the military but even indeed, and I use this term with advisement here, civil war."
The army quelled bread riots in Egypt in 1977 and halted a rampage by policemen over pay in 1986, but the momentous scale and consequences of the uprising that began on Jan. 25 across the country dwarfs those events.
I FELT YOUR PAIN
"I have felt all the pain you felt," said Mubarak, who last week had already pledged not to run again in September. "I will not go back on my response to your voice and your call."
"Your demands are legitimate and just ... There is no shame in hearing your voices and opinions, but I refuse any and all dictations from abroad," he said.
"I have announced my commitment to peacefully hand over power after upcoming elections ... I will deliver Egypt and its people to safety," he said, once more, as he did last week, trying to paint himself as the father of the nation.
After the speech last week many Egyptians beyond the urban elites in the vanguard of recent protests had said they were satisfied by a promise of change in due course and have said they were more interested now in an end to economic disruption.
Tourists, a key source of income to the country of pyramids and Red Sea beaches, have deserted the hotels since last month.
But the anger on the streets of Cairo and Alexandria, hours ahead of a planned "Day of Martyrs" protest on Friday to commemorate the 300 or more killed by security forces since Jan. 25 appeared ominous in an environment where the army has been on the streets for two weeks and on Thursday said it was in charge.
"The army is worried that tomorrow on Friday the people will overpower state buildings and the army will not be able to fire back," protester Mohamed Anees said. "The army now is pressuring Mubarak to resolve the situation."
It remained to be seen if his speech would satisfy the army.
"He doesn't seem to understand the magnitude of what is happening in Egypt. At this point I don't think it will suffice," said Alanoud al-Sharek at the International Institute for Strategic Studies. "He has performed quite a sleight of hand. He has transferred authority to Omar Suleiman while somehow retaining his position as ruler."
WASHINGTON WARY OF TUMULT
News that Mubarak may hand over power, or be unseated, in this key American ally in the Middle East had provoked loud and emotional cheers in Cairo's Tahrir Square, the focal point for pro-democracy demonstrations. But some in the crowd were quick to protest they did not want military rule.
Washington's approach to the turmoil has been based from the start on Egypt's strategic importance -- as a rare Arab state no longer hostile to Israel, as the guardian of the Suez canal linking Europe and Asia and as a major force against militant Islam in the Middle East.
President Barack Obama, hailing history unfolding, said the United States would support an "orderly and genuine transition to democracy" -- Washington would be publicly uncomfortable if the army held on to power, and also does not want Islamist rule.
It had no immediate reaction to Mubarak's speech.
Washington pressured Mubarak to speed up the pace of reform but stopped short of demanding the resignation of the president of the country, which has a 1979 peace treaty with Israel and an army which receives about $1.3 billion in U.S. aid a year.
The protests that have shaken the Egyptian political system and the political landscape of the Middle East was partly inspired by the example of Tunisia, where street protesters toppled the president on Jan. 14.
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