The move by demonstrators capped two days of clashes across the tiny island kingdom that left at least two people dead, parliament in limbo by an opposition boycott and the king making a rare address on national television to offer condolences for the bloodshed.
Security forces - apparently under orders to hold back - watched from the sidelines as protesters chanted slogans mocking the nation's ruling sheiks and called for sweeping political reforms and an end to monarchy's grip on key decisions and government posts.
The unrest in Bahrain, home to the U.S. Navy's 5th Fleet, adds another layer to Washington's worries in the region. In Yemen, police and government supporters battled nearly 3,000 marchers calling for the ouster of President Ali Abdullah Saleh in a fifth straight day of violence.
Yemen is seen as a critical partner in the U.S. fight against a network inspired by al-Qaida. The Pentagon plans to boost its training of Yemen's counterterrorism forces to expand the push against the al-Qaida in the Arabian Peninsula faction, which has been linked to attacks including the attempted airliner bombing in December 2009 and the failed mail bomb plot involving cargo planes last summer.
Saleh has been holding talks with Yemen's powerful tribes, which can either tip the balance against him or give him enough strength to possibly ride out the crisis.
The political mutinies in the Arab world show the wide reach of the calls for change spurred by the toppling of old-guard regimes in Tunisia and Egypt.
In Jordan, hundreds of Bedouin tribesmen blocked roads to demand the government return lands they once owned. Saudi activists are seeking to form a political party in a rare challenge to the near-absolute power of the pro-Western monarchy.
Yemen's grinding poverty and tribal complexities also stand in contrast to the relative wealth and Western-style malls and coffee shops in Bahrain's capital of Manama.
But many in Bahrain still boiled down their discontent to a cry for economic justice as well - saying the Sunni rulers control the privileges and opportunities and the Shiite majority struggles with what's left over and are effectively blackballed from important state jobs.
"I demand what every Bahraini should have: a job and a house," said student Iftikhar Ali, 27, who joined the crowds in the seaside Pearl Square. "I believe in change."
Protesters quickly renamed it "Nation's Square" and erected banners such as "Peaceful" that were prominent in Cairo's Tahrir Square. Many waved Bahraini flags and chanted: "No Sunnis, no Shiites. We are all Bahrainis."
Others set up tents and distributed tea and kabobs for those planning to spend the night under one of the city's landmarks: a nearly 300-foot (90-meter) monument cradling a giant white pearl-shaped ball that symbolizes the country's heritage as a pearl diving center.
Someone used stones to spell out the message in Arabic: "The real criminals are the royal family."
There is no direct call to bring down the king, whose family has ruled Bahrain for more than two centuries. But he is suddenly under unprecedented pressure to make serious changes in how the country is run.
The key demands - listed on a poster erected in the square - included the release of all political prisoners, more jobs and housing, an elected Cabinet and the replacement of the longtime prime minister, Sheik Khalifa bin Salman Al Khalifa.
Even the security forces they have battled represent something more than just state-backed muscle.
Bahrain's leaders have for years granted citizenship to Sunnis from across the region to expand their base of loyalists and try to gain demographic ground against Shiites, about 70 percent of the population of some 500,000. Many of the Sunnis - Jordanians, Syrians and others - receive police jobs or other security-related posts.
In a clear sign of concern over the widening crisis, King Hamad bin Isa Al Khalifa went on nationwide TV to offer condolences for the deaths, pledge an investigation into the killings and promising to push ahead with promised reforms, which include loosening state controls on the media and Internet.
"We extend our condolences to the parents of the dear sons who died yesterday and today. We pray that they are inspired by the Almighty's patience, solace and tranquility," said the king, who had previously called for an emergency Arab summit to discuss the growing unrest.
Bahrain is one of the most politically volatile nations in the Middle East's wealthiest corner despite having one of the few elected parliaments and some of the most robust civil society groups.
The nation's Shiites have long complained of discrimination. A crackdown on perceived dissent last year touched off weeks of riots and clashes in Shiite villages, and an ongoing trial in Bahrain accuses 25 Shiites of plotting against the leadership. The detainees allege they have been tortured behind bars.
Bahrain is also an economic weakling compared with the staggering energy riches of Gulf neighbors such as Saudi Arabia and Qatar, which can afford far more generous social benefits. Bahrain's oil reserves are small and its role as the region's international financial hub have been greatly eclipsed by Dubai.
In Geneva, a statement by the U.N. High Commissioner for Human Rights Navi Pillay called on Bahrain to "curb the excesses" of security forces.
"Too many peaceful protesters have recently been killed across the Middle East and North Africa," Pillay said.
The deaths also brought sharp denunciations from the largest Shiite political bloc, Al Wefaq, which suspended its participation in parliament, and could threaten the nation's gradual pro-democracy reforms that have given Shiites a greater political voice. The group has 18 seats in the 40-member chamber.
The second day of turmoil began after police tried to disperse up to 10,000 mourners gathering at a hospital parking lot to begin a funeral procession for Ali Abdulhadi Mushaima, 21, who died in Monday's marches.
Officials at Bahrain's Salmaniya Medical Complex said a 31-year-old man, Fadhel Salman Matrook, became the second fatality when he died of injuries from birdshot fired during the melee in the hospital's parking lot. The officials spoke on condition of anonymity because they were not allowed to speak to journalists.
A statement from Bahrain's interior minister, Lt. Gen. Rashid bin Abdulla Al Khalifa, expressed "sincere condolences and deep sympathy" to Mushaima's family. He expanded on the king's pledge: stressing that the deaths will be investigated and charges would be filed if authorities determined excessive force was used against the protesters.
But that's unlikely to appease the protesters. In the past week, Bahrain's rulers have tried to defuse calls for reform by promising nearly $2,700 for each family and pledging to loosen state controls on the media.