Medics reported 26 dead and 500 wounded by live rounds, batons or after inhaling tear gas.
"Twenty six people were killed tonight," Tarek Nooman, a doctor in a field hospital in Sanaa's Change Square, epicentre of the anti-regime protests, told AFP.
Mohammed al-Abani, a doctor running another field hospital, said 500 people were hurt.
Witnesses said security forces and armed civilians opened fire on tens of thousands of protesters who left Change Square, where they have camped since February demanding regime change, and marched towards the city centre.
Water cannons and tear gas were also used, they added. A medical official said that the injuries of 25 of those wounded by live rounds and shrapnel were critical.
Among them, he said, was a member of Yemen's national council, an umbrella of opposition groups, and a leading member of the Islamist Al-Islah (Reform) opposition party.
He named them as Mohammed al-Dhaheri, a professor of political science at Sanaa University, and Ahmed al-Qumairi.
Security forces later deployed heavily around Change Square, witnesses said, reporting exchanges of fire between First Armoured Brigade troops and forces loyal to President Ali Abdullah Saleh.