In a speech to the U.S. Coast Guard Academy, Albright said Suharto should "preserve his legacy" by stepping down and permitting a transition of democracy.
She said of Suharto: "Now he has an opportunity for an historic act of statesmanship" by stepping down.
Opposition leaders, fearing violence in the capital, called off demonstrations Wednesday that were to commemorate the start of Indonesia's independence movement from the Dutch.
Earlier, the parliamentary leader of the leading Gokar party said the faction backed calls for a special session of the nation's electoral college to seek the 76-year-old leader's resignation.
On Tuesday, Suharto said he would step down after instituting reforms and holding elections. The students insist Suharto must quit now, rather than at some indefinite date down the road.
Still, President Suharto remains, surrounded in his palace by tens of thousands of soldiers. And students demanding his immediate resignation continue their protest at the parliament building.
Since Monday, students have occupied the legislature building in an exultant protest against the long rule of Suharto. But only Wednesday did they become bold enough to break into the inner sanctum.
"We are going to stay here until Suharto goes," said protester Airino Thamrin.
Indonesia's big day of protest ended before it began, thanks to army barricades blocking access to a national monument where a million hoped to gather. Some were glad the streets were quiet.
"When the people become crowded, there will be disaster," said one citizen.
Opposition leader Amien Rais warned protesters to stay home, and avoid the dangerous streets. In a rare moment of publicity for him, the government aired his statement on TV, over and over.
At a news conference earlier, Rais accused the military of being ready to tolerate a "Tiananmen" situation - a reference to the massacre of hundreds of pro-democracy students by Chinese troops in Beijing's main square in 1989.
"An army general (told me) he doesn't care at all if a Tiananmen accident ... will take place today in Jakarta," Rais said. "I was so shocked hearing this."
At the Parliament, students continued their occupation and more came in.
Although there is military present to guard against possible student attacks, it is fairly light. Soldiers are armed with rubber bullets, but sometimes, when they think no one is looking, they actually applaud the students.
Protest marches took place peacefully in other cities across Indonesia Wednesday. Polic said as many as 50,000 protesters gathered in Yogyakarta.
Concerned for U.S. citizens in Jakarta, a U.S. Marine amphibious force led by a helicopter carrier was being diverted toward Indonesia in case a military evacuation of Americans is needed, officials said Wednesday.