Clashes broke out between police and protesting youths near Cairo's iconic Tahrir Square where activists have been holding fort for the past week.
The new demonstrations came a day after Mursi held a meeting with the nation's top judges to defuse the crisis over the controversial decree, but the meeting failed to break the impasse as thousands of people poured onto the streets in a massive show of defiance.
Protests also spread to outlying provinces including Alexandria, second-biggest city and central parts of the country.
After the meeting, Mursi dug in his heels making it clear to the judiciary that he did not infringe on its authority by assuming sweeping powers.
Presidential spokesman Yasser Ali said that Mursi's recent decree would not be subject to modification, noting that the decree may have been "misunderstood" by the public.
The decree, issued by the presidency on Thursday night, was met with outrage by Egypt's opposition, who described it as an "attack on democracy" and a "threat to judicial independence."
The decree stated that presidential decisions will enjoy temporary immunity from legal challenge. The decree also protects Egypt's Islamist-led Constituent Assembly, tasked with drafting a new constitution, and the Shura Council (the upper house of parliament) from dissolution by court order.
"The decree will only immunise the President's sovereign decisions (from legal challenges)," asserted Ali, stressing the measure's temporary nature.
The statement was issued following the President's meeting with senior judicial figures.
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