Armenia's crisis deepened Wednesday as tens of thousands of people took to the streets after the opposition accused the government of refusing to negotiate a transfer of power following the resignation of veteran leader Serzh Sarkisian.

Authorities beefed up security in the capital Yerevan, cordoning off buildings housing the government and the ruling Republican party, and deploying hundreds of police and several armoured personnel carriers.

Protesters shouted, clapped, whistled, beat drums and tooted car horns in demonstrations that underscored the political turmoil gripping the impoverished former Soviet republic.

Led by 42-year-old Nikol Pashinyan, thousands of demonstrators marched through Yerevan against the Republican Party's unwillingness to facilitate the transfer of power after former president Sarkisian stood down Monday from his new post of prime minister.

Pashinyan sported his trademark khaki-coloured T-shirt and clutched a megaphone as protesters chanted "Nikol for prime minister" and "We are the masters of our country".

Demonstrators warned of possible clashes with the authorities if a solution to the crisis was not found quickly.

"There is a danger that riots, clashes could start if the Republicans do not leave in a calm manner," 40-year-old lawyer Ruzanna Vartanyan told AFP.

Stepan Grigoryan, a political analyst who joined the rallies, said it was a do-or-die situation, describing the current system as "criminal."

"The head has been chopped off," he said, referring to Sarkisian's resignation Monday, "but the body -- the Republican Party -- remains and it needs to be removed."

Russia watching closely

Russia -- which has a military base in Armenia -- said Wednesday it was watching the situation "very closely" but reiterated that it would not interfere.

"We believe this to be Armenia's internal affair," President Vladimir Putin's spokesman Dmitry Peskov said.

In a surprise move, Sarkisian, who served as president for a decade, stood down as prime minister just a week after being elected by parliament, following days of protests by demonstrators who accused him of a blatant power grab.

Pashinyan, leader of the Civil Contract Party, had been due Wednesday to hold talks with acting government head Karen Karapetyan to discuss a "peaceful" power transfer. But the negotiations were cancelled late Tuesday.

Pashinyan accused the authorities of wanting to nominate a Republican Party candidate for prime minister, warning that the opposition would boycott snap parliamentary elections in that case.

"I want to tell Karen Karapetyan: I want you to understand that we will of course not allow you to implement such steps and the sooner you understand this the better it will be for everyone," he said.

Pashinyan has insisted the new premier must be a "people's candidate" and not a member of Sarkisian's party, and told reporters he was himself willing to lead.

Most political parties sided with the protest movement, and Edmon Marukyan of the Bright Armenia party, said the Yelk opposition bloc would nominate Pashinyan for prime minister.

But he said the opposition supporters were currently 13 votes short of a majority. A candidate would need 53 votes to get elected.

Karapetyan, who has accused Pashinyan of promoting his own agenda, proposed holding a snap election so voters themselves could decide on the new leader under a parliamentary system of government.

'Dialogue extremely important'

Armenia's President Armen Sarkisian, who is no relation to Serzh Sarkisian, and is a ceremonial figurehead, urged compromise.

"It's extremely important to begin dialogue," he said in a statement.

The opposition had accused 63-year-old Serzh Sarkisian of wanting to extend his grip on power under a new parliamentary system, saying he failed to tackle a litany of problems including poverty and corruption.

Protests broke out several days before his election on Tuesday last week, with tens of thousands of people eventually taking to the streets of Yerevan and other cities in largely peaceful rallies.

Armenia's arch-foe Azerbaijan has expressed hope that a new Armenian government would adopt a "constructive" approach over the breakaway region of Nagorny Karabakh.