A top aide to Mohammad Morsi says a coup is underway after the embattled Egyptian president defied an army deadline to yield to protesters.

After days of protests demanding Mr Morsi quit, the powerful military gave him 48 hours to step down or face the consequences.

The Islamist leader insisted he would remain as president, instead proposing a consensus government as a way out of the country's crisis.

Army troops and armoured cars have been deployed across Cairo, and state television says an army-backed announcement on a political roadmap will take place this morning (AEST).

National security advisor Essam al-Haddad says a military coup is underway.

"For the sake of Egypt and for historical accuracy, let's call what is happening by its real name: Military coup," he said in a statement on Facebook.

"As I write these lines I am fully aware that these may be the last lines I get to post on this page."

The US State Department has issued a statement saying it is "very concerned" about the situation, but cannot confirm whether a military coup is underway.

Mr Morsi is reportedly holed up a Republican Guard barracks in a Cairo suburb, near to his office.

Troops have reportedly erected barbed wire around the barracks where Mr Morsi is working and slapped a travel ban on the president.

In a last-ditch statement before the deadline passed at 1.00am (AEST), the presidency said a coalition government should be part of a solution to the country's political standoff.

Mr Morsi reiterated his call for a national dialogue and the formation of a panel to amend the country's controversial Islamist-drafted constitution.

But Mr Morsi, who has said he would rather die than step down as leader, insisted he would not quit.

Opposition parties refused to negotiate with him and met instead with the commander of the armed forces.

Political rivals protest on streets

Military chiefs had earlier said they were willing to shed blood against "terrorists and fools", raising fears of deadly unrest.

Yet despite talk of martyrdom and warnings of civil war, the dominant mood among the tens of thousands of political rivals that have filled Cairo's streets was one of elation.

As the ultimatum expired, hundreds of thousands of anti-Morsi protesters in Tahrir Square let off fireworks, cheered and waved Egyptian flags.

Thousands of people were also gathered in Nasr City in a show of support for Mr Morsi, despite an attack by a group of men that killed 16 of them and left 200 injured overnight.

Mr Morsi, who was previously a senior Muslim Brotherhood leader and is Egypt's first freely elected president, was catapulted to power by the 2011 uprising that ended three decades of authoritarian rule from Hosni Mubarak.

His opponents accuse him of betraying the revolution by concentrating power in Islamist hands and of sending the economy into freefall.

But his supporters say many of the challenges he faces he inherited from a corrupt regime and that he should be allowed to serve out his term, which ends in 2016.

ABC/wires