SANAA Yemen - Thousands of protesters took to the streets of Yemen Friday demanding the resignation of the president, a day after the U.S. State Department said it hoped a power transfer deal could be signed within a week.

President Ali Abdullah Saleh has been hanging on to his post despite local, regional and international pressure to leave office. Al-Qaida linked militants have been taking advantage of the turmoil to overrun parts of southern Yemen.

Saleh has come close to signing the six-nation Gulf Cooperation Council's power transfer proposal several times, only to back out at the last minute. It offers him and his family immunity from prosecution over the deaths of protesters in exchange for leaving office.

Saleh has been in Saudi Arabia since early June, when he was seriously wounded in an attack on his compound in Sanaa. On Friday, a Yemeni government official returning from Saudi Arabia said Saleh will not return to Yemen.

While that could be an indication that he will agree to leave office, the official said that in his conversations with Saleh, the president expressed discontent with the Gulf Cooperation Council's proposed deal. Saleh, according to the official, felt that Saudi Arabia cheated him by backing the accord following pressure from the United States.

The official said he met Saleh at the palace where he is residing in Riyadh and that the president was with a number of his children. He said the luxurious palace offered to Saleh by Saudi leaders is meant to show the extent to which they want him to remain in the kingdom.

The official spoke on condition of anonymity because he was not authorized to release the information.

The U.S. issued a statement late Thursday that indicated arrangements for Saleh to resign could be nearly complete.

"The United States believes that these remaining tasks can and should be accomplished quickly and it hopes that an agreement is reached and the signing of the GCC Initiative takes place within one week," the State Department said in a statement.

Opponents of the president kept up their pressure Friday.

Tens of thousands of people demonstrated in the capital, Sanaa, and other major cities, including the southern city of Taiz, to demand Saleh's resignation. A day earlier in Taiz, government forces opened fire on demonstrators, killing one and wounding 10 others, a medical official said. He was speaking on condition of anonymity in fear of retribution.

The U.S., which has supported Yemen's military in its fight against al-Qaida-linked militants in the south, also said that it remains concerned about reports of continued violence and called on the Yemeni government to protect peaceful protesters. The U.S. has withdrawn its support from Saleh, once a close ally.

Islamic militants linked with al-Qaida have taken advantage of the political turmoil gripping Yemen, seizing control of a number of towns and the provincial capital of the southern province of Abyan.

The military is battling militants in the south in an effort to regain control. The opposition has accused Saleh of allowing militants to control key southern cities as a means of pressuring the West to choose between his rule or instability. The government has denied the accusations.