Egyptians have taken their protests against President Mohammed Morsi to the gates of his palace, demanding his ouster in scenes not witnessed even during demonstrations that toppled Hosni Mubarak.

About 300 protesters were camped in front of the Itihadiya presidential palace on Wednesday morning after it had been besieged the previous night by anti-Morsi crowds furious at a Nov 22 decree expanding his powers, The Associated Press reported.

An anonymous Egyptian official said Morsi returned to work in the presidential palace on Wednesday morning, AFP reported.

He had left "on schedule" after his meetings on Tuesday and went back to his house in a Cairo suburb, the interior ministry had said on Tuesday.

Before dawn, street vendors began to set up shop along the walls of the palace that had been sprayed with anti-Morsi graffiti.

"The final warning, the presidency under siege," read the headline of daily al-Shuruk as the independent Al-Watan declared "Revolution at the president's doorstep".

During Tuesday's protest, which drew tens of thousands of demonstrators, a group cut through barbed wire a few hundred meters from the palace, prompting police to fire tear gas before retreating and allowing demonstrators to reach the palace walls.

Demonstrators banged on lamp posts and chanted "leave" in a thunderous show of force outside the palace not seen before.

On the last days of the protests that brought down Mubarak, tens of thousands had tried to reach the palace but were prevented from getting close by military police.

Hundreds more Morsi opponents spent Tuesday night in Cairo's Tahrir Square inside dozens of tents erected almost two weeks ago, as activists used social networking sites to appeal for blankets and food.

The protesters are angry over Morsi's decree that granted him sweeping powers and enabled him to call a Dec 15 referendum on a draft constitution that have been widely boycotted.

As he faces the worst political crisis since he took office in June, Morsi insists the measures are aimed at cutting short a tumultuous transition.

The National Rescue Front, led by high profile dissidents including former UN nuclear watchdog chief Mohammed ElBaradei, ex-Arab League chief Amr Mussa and former presidential candidate Hamdeen Sabbahi, on Wednesday called on Morsi to cancel the decree, state media said.

They also urged the scrapping of the referendum and the formation of a new panel to draft a constitution that better reflects Egyptian society.

The decree has deeply polarized the country, pitting Morsi's supporters against the largely secular-leaning opposition.

In the central province of Minya, clashes flared between opponents and supporters of Morsi outside the headquarters of his Freedom and Justice Party, the political arm of the Muslim Brotherhood.

Police fired tear gas at the crowd after Morsi opponents tore down a picture of the president, prompting skirmishes with his supporters.

Protests also erupted in the Mediterranean city of Alexandria and the central province of Sohag, with the spreading unrest prompting US appeals for restraint.

"We would simply urge that protesters express their views peacefully and that they be given the environment, if you will, to protest peacefully," State Department spokesman Mark Toner said.

AFP-AP