Bahraini troops and armoured vehicles on Saturday left a Manama square that had been a base for anti-government protesters, hours after opposition groups rejected a royal dialogue call unless the military stood down.
A handful of demonstrators tried to move back into their former stronghold in Pearl Square after the army pullout, but police firing tear gas beat them back.
One man raced to the centre of the traffic circle, fell to his knees to kiss the yellowed grass and began praying as other protesters celebrated. Moments later, 10 police cars pulled up and policemen beat up one protester as others fled.
Troops in tanks and armoured vehicles took over the traffic circle on Thursday after riot police attacked protesters who had camped out there, killing four people and wounding 231.
Bahrain's crown prince announced that all troops had been ordered off the streets and that police would maintain order.
The main Shi'ite bloc and other opposition groups earlier rejected a royal call for dialogue to end the unrest unless troops were withdrawn.
"Nobody is willing to sit with officials if the military is killing people," Ibrahim Mattar, a member of the main Shi'ite Wefaq bloc which quit parliament on Thursday, told Reuters.
"We don't feel there is a serious will for dialogue because the military is in the streets and people are not allowed to protest," he added.
Turmoil has rocked Bahrain since demonstrators, mostly from the 70 percent Shi'ite majority, took to the streets to demand more say in the tiny Sunni-ruled Gulf Arab island.
Shi'ites feel cut out of decision-making and complain of discrimination in access to state jobs and housing.
King Hamad bin Isa al-Khalifa offered a national dialogue with all parties on Friday to try to end the turmoil in which six people have been killed and hundreds wounded since Monday.
"Crown Prince Salman bin Hamad Al Khalifa, Deputy Supreme Commander of the Armed Forces, has ordered the withdrawal of all military from the streets of Bahrain with immediate effect," a statement said on Saturday. "The Bahrain police force will continue to oversee law and order."
More than 60 people were in hospital with wounds sustained on Friday when security forces fired on protesters as they headed to Pearl Square, then still in military hands.
The European Union's foreign policy chief Catherine Ashton said in a statement she was deeply concerned about new reports on violence by the security forces.
"I urge the Bahraini authorities to respect fundamental human rights including freedom of expression and the right to assemble freely," she said, urging all parties to use restraint.
Young activists called for an open-ended strike from Sunday and the closure of all public and private schools on a Facebook page called the "February 14 revolution in Bahrain".
The group set its own conditions for dialogue, saying troops must withdraw and protesters be allowed back into Pearl Square.
It also demanded the release of all political prisoners and word on the fate of missing people, as well as the resignations of the defence and interior ministers and the security chief.
US President Barack Obama spoke to King Hamad on Friday, condemning the violence and urging the government to show restraint and respect the rights of its people.
NO IMPACT ON US BASE
Mattar said the king must accept the "concept" of constitutional monarchy and withdraw troops before any dialogue. "Then we can go for a temporary government of new faces that would not include the current interior or defence ministers."
He reiterated an opposition demand for the king to fire his uncle, Sheikh Khalifa bin Salman al-Khalifa, prime minister since Bahrain gained its independence in 1971.
"We are not going to enter a dialogue as Shi'ites," Mattar said. "They try to put the issue in this frame. The dialogue should be with all people who were protesting. Some are liberal, non-Islamic. Some are Sunni and some Shi'ite."
A naval base near Manama that hosts the US Navy's Fifth Fleet helps the United States to project power across the Middle East and Central Asia, including Iraq and Afghanistan.
A Fleet spokesman said there was no significant impact on operations and Jennifer Stride, spokeswoman for the US naval base, said no evacuation of families was planned.
The United States is caught between the desire for stability in an ally seen as a bulwark against Iran and the need to uphold the people's right to express their grievances.
Also on Friday, Shi'ite mourners buried the four people killed in the raid on Pearl Square, which protesters had hoped to turn into a base like Cairo's Tahrir Square, the heart of a revolt that ousted Egypt's Hosni Mubarak.
King Hamad said he had granted the crown prince all powers to "fulfil the hopes and aspirations" of all Bahrainis in the national dialogue.
Crown Prince Sheikh Salman bin Hamad al-Khalifa appealed on television for calm. "Today is the time to sit down and hold a dialogue, not to fight," he said on Friday.
The unrest in Bahrain, a minor non-OPEC oil producer and regional banking hub, has shaken confidence in the economy.
In 1999, King Hamad introduced a constitution allowing elections for a parliament with some powers, but royals still dominate a cabinet led by the king's uncle for 40 years.