Saleh said on Friday that the decision to impose the state of emergency was made by the country's national security council, but there was no immediate indication of how long it would last.
"The national security council announces a state of emergency across Yemen, and a curfew is set upon
armed people in all Yemeni provinces. And the security forces with the army will take responsibility for
stability," he said.
He also expressed "sorrow for what happened today in university square".
The Reuters news agency reported Saleh as saying that it was clear that there were "armed elements" amongst anti-government protesters, and that the clashes earlier in the day were between citizens and protesters, not protesters and security forces.
At least 41 people were killed and scores wounded after the Yemeni security forces opened fire on protesters at University square, in the capital Sanaa.
Security forces opened fire in attempts to prevent protesters from marching out of the square where they were gathered, sources said. Medical sources said the death toll was likely to rise.
Pro-government "thugs" also opened fire on protesters from houses close to University square, witnesses told the AFP news agency.
Muttahar al-Masri, the country's interior minister, put the death toll at 25, and said that a curfew was being imposed as part of the state of emergency.
'Hundreds' injured
Friday's attack came as tens of thousands gathered across the country, continuing to demand that Saleh - the country's ruler of 32 years - step down.
Al Jazeera correspondents in Sanaa reported that many protesters were shot in the head and neck; most of the injured were shot with live ammunition.
Error processing SSI file
Medics at a nearby medical centre told Al Jazeera almost 200 people were injured; many were in critical condition. One medic called the attack a "massacre".
Anti-government demonstrations were also held in other cities including Taiz, Ibb, Hodeidah, Aden, and Amran following Muslim midday prayers on Friday.
"They want to terrorise us, They want to drag us into a cycle of violence to make the revolution meaningless," said Jamal Anaam, an anti-government protester.
"We were protesting peacefully and they shot at us. I won't leave this place until the president goes, even if I have to die," said another demonstrator, Ahmad, 25.
"It is a massacre," said Mohammad al-Sabri, an opposition spokesman. "This is part of a criminal plan to kill off the protesters, and the president and his relatives are responsible for the bloodshed in Yemen today."
Jamal al-Sharaabi, a photojournalist for the independent weekly al-Masdar was killed in the firing, becoming the first journalist confirmed to have been killed in Yemen since unrest began, the Committee to Protect Journalists said late on Friday.
Opposition rejects talks
The opposition says that there is no longer any possibility of talks with Saleh's government.
"We condemn these crimes," said Yassin Noman, rotating president of Yemen's umbrella opposition group. "There is no longer any possibility of mutual understanding with this regime and he has no choice but to surrender authority to the people."
Hissam Youssef, the chief of staff of the Arab League's secretary-general, told Al Jazeera that the body would be meeting to hold consultations on the latest violence in Yemen.
"What is happening in Yemen is extremely disturbing and it is a source of deep concern ... We have a clear position in relation to how to deal with people who are demonstrating peacefully, since this is their right. And we also feel that governments have to respond positively to the demands that are being placed by the people in different places.
"The situation in Yemen has been considered, but now the situation is escalating - we have asked for dialogue, we have asked for responding positively to the demands and concerns of the people, and we are continuing our consultations in this regard."
Standing firm
Ahead of the protests, hundreds of police patrolled the streets of Sanaa and elite forces set up fortifications around the presidential compound, ministries and the headquarters of Yemen's ruling party.
Government forces have previously used live fire, rubber bullets, and tear gas on anti-regime rallies, in the government's increasingly violent crackdown on protests.
Yemen, the Arabian Peninsula state neighbouring oil giant Saudi Arabia, has been hit by weeks of protests set in motion by uprisings in North Africa that toppled long-serving leaders in Tunisia and Egypt and spread to the Gulf states of Bahrain, Oman and Saudi Arabia.
Saleh has maintained a firm grip on power for over three decades and has scoffed at calls to step down, saying he will only do so when his current term of office expires in 2013.
Despite violence and threats, anti-government protesters refuse to cease demonstrating until Saleh's ouster.
Hashem Ahelbarra, Al Jazeera's Yemen correspondent, said that Saleh is now faced with a clear choice.
"He basically has two options. To say 'dialogue', but then the people will ask him we need guarantees and you have to implement them now; if he says 'No, I'm holding out', then there's going to be bloodshed."
Nabil Hasan al-Faqih, the country's tourism minister, resigned from both his post and membership of the ruling party late on Friday in protest against the killings.
"I did it today. I resigned from the government and the People's General Congress," he told Reuters, adding that his decision was a result of "the events the country is going through".
International condemnation
Ahelbarra also said that there is little faith in the Arab League amongst Yemenis.
"People in Yemen have no faith in the Arab League, they don't think that the Arab League can bring any solution to this crisis which is evolving now."
In a statement on Friday, Barack Obama, the US president, condemned the violence in Yemen, saying that President Saleh should honour a pledge to allow peaceful demonstrations. He said that those responsible for Friday's violence "must be held accountable".
Hillary Clinton, the US secretary of state, said on Friday that the US wishes to see a "political solution" to the crisis.
""The United States is alarmed by today's violence in Sanaa against anti-government protesters and is seeking to verify reports that this is the result of actions by security forces," she said in a statement.
"I am dismayed by the reports coming from Yemen. I have repeatedly and unreservedly condemned the use of violence against protesters in Sanaa and other cities, and the loss of life," she said in a statement.
"Human rights and fundamental freedoms must be fully respected. President Saleh must stand by his commitments to uphold the right to peaceful protest, as he announced on 10 March. I ask him to stop violence now," she said.
