Yemeni president Ali Abdullah Saleh, who has been in power for more than three decades, says he will not extend his presidential term which expires in 2013, nor pass power to his son.
He spoke to parliament ahead of a rally called for in the capital on Thursday, which echoes protests in Tunisia and Egypt, the BBC reports.
He called on opposition groups to cancel the demonstrations.
The largest opposition group welcomed Mr Saleh's move but said the rallies would go ahead.
Tens of thousands of people gathered in January during days of protests urging Mr Saleh to step down.
Mr Saleh came to power as president of North Yemen in 1978 and, when the country was united with South Yemen in 1990, he became president of the new republic.
The country has high population growth, 40% unemployment, rising food prices and acute levels of malnutrition.
Some 40% of the population lives on less than $US2 a day and parts of the country have become a haven for al-Qaeda militants.