Egyptian President Mohamed Morsi has annulled a decree he issued last month expanding his powers, an official told a Cairo news conference.
A referendum on a draft constitution would, however, still go ahead as planned on December 15, said Selim al-Awa, an official acting as spokesman of a meeting Morsi held earlier on Saturday with other political leaders.
"The constitutional decree is annulled from this moment," al-Awa said.
Harvard associate professor Tareq Masoud tells Al Jazeera that the opposition's refusal of dialogue was an 'error'
The decree and the referendum were at the heart of anti-Morsi protests that have rocked Egypt in the past two weeks.
At least seven people have been killed in the unrest, as demonstrators opposing and supporting Morsi clashed near the presidential palace.
He said that constitutionally, Morsi was unable to change the date for the referendum.
But he added that, if the draft constitution were rejected, a new one would be drawn up by officials elected by the people, rather than ones chosen by parliament as for the current text.
Al Jazeera's Sherine Tadros, reporting from Cairo, said the withdrawal of the November 22 decree was a "huge development", but "for the opposition, this may only go half way in terms of their demands being met."
"The big question now is how the opposition will respond."
Khaled Dawood, the spokesman for the National Salvation Front, one of largest opposition parties in Egypt, said annulling the decree was "relatively meaningless".
"The key issue of securing the process of adapting of the constitution is done," he told Al Jazeera.
"Unfortunately I don't think the president is leaving us any other option than to escalate our opposition.
Live Box 2011111713397233347
Asked whether the opposition's goal was to unseat Morsi, Dawood said: "This is definitely not in our agenda at all. Our agenda is basically limited to having a new draft constitution that everybody is satisfied about before going to a referendum.
"We respect he was elected with 51.7 per cent of the vote, but 48 per cent did not vote for him. That means that he has to compromise, he has to build consensus."
One of the groups involved in the struggle to topple former President Hosni Mubarak, the April 6 Youth Movement, swiftly dismissed the announcements as "a political manoeuvre aimed at duping the people".
It called for the protests to continue to stop "the referendum on the constitution of the Muslim Brotherhood", a reference to the party backing Morsi.
The country's main opposition parties say the draft constitution is biased and have rejected Morsi's call for dialogue.
The draft constitution has been criticised for its potential to weaken human rights and the rights of women, and out of fear it would usher in Islamic interpretation of laws.
Earlier on Saturday, Egypt's military gave warning on "disastrous consequences" if the political crisis gripping the country was not resolved through dialogue.
"The path of dialogue is the best and only way to reach agreement and achieve the interests of the nation and its citizens," the military said in a statement.
"The opposite of that will take us into a dark tunnel with disastrous results."
Source: Al Jazeera and agencies