Egypt's army deployed tanks outside the presidential palace on Thursday after five demonstrators died overnight in clashes between supporters and opponents of Islamist President Mohamed Morsy.

Morsy was expected to issue a statement to address the worst violence since his June election, which has pitted Islamists against an opposition that has escalated protests since he assumed extensive powers on November 22.

Running street battles that carried on through the night outside the Itihadiya palace in northern Cairo also left 350 people wounded, many from buckshot, the official MENA news agency reported.

The opposition has said it would organise further marches to the palace as a top presidential aide accused them of coordinating with loyalists of deposed dictator Hosni Mubarak.

Morsy is expected to "reveal that facts and call for a dialogue," the head of his office Refaa Al-Tahtawy told the official Al-Akbar newspaper.

The stage was set for Wednesday's violence when Morsy's Muslim Brotherhood movement announced a march to the palace, where opposition protesters were staging a sit-in a day after tens of thousands surrounded the sprawling complex.

The protesters threw fire bombs and rocks at each other on Wednesday as their simmering stand-off over the president's expanded powers and a draft constitution turned violent.

Bloodied protesters were seen carried away as gunshots rang out and the rivals torched cars and set off fire crackers near the palace, where opponents of Morsy had set up tents before his supporters drove them away.

Riot police were eventually sent in to break up the violence, but clashes still took place in side streets near the palace in the upscale neighbourhood of Heliopolis.

The opposition says it will not stand down until Morsy discards his new powers, which allow him to take decisions uncontested by courts, and cancel a snap December 15 referendum on a new constitution opposed by liberals and Christians.

In the early hours of Thursday, gunshots rang out intermittently and sporadic violence continued, an AFP correspondent said.

Later in the morning, a few hundred Morsy supporters remained outside the palace.

The opposition protesters had left the scene.AFP