Police in Tunis opened fire and shot tear gas in the air as stone-throwing youths breached a curfew and surrounded government buildings.
At least three people were reportedly killed, bringing to more than 60 the number said by human rights groups to have died in a wave of unrest in what was previously seen as one of the Arab world's most stable and prosperous countries.
Four more people had already been shot and killed in Tunis's suburbs on Wednesday night.
President Zine al-Abidine Ben Ali, 74, who has been in power since he overthrew his predecessor in 1987 sacked the interior minister on Wednesday but failed to quell calls for his resignation.
On Thursday night Mr Ben Ali attempted to pacify protesters by saying in a television address that he would not change the constitution to allow him to run again when his term expires in 2014. He also ordered his security forces to stop using firearms against protesters and said prices for sugar, milk and bread would be reduced.
However, as the president was speaking, promising an end to force, two people were killed as police opened fire on protesters, witnesses said.
Hillary Clinton ended a tour of the Gulf with a warning that leaders who failed to carry out political and economic reform risked being cast aside.
"In too many places, in too many ways, the region's foundations are sinking into the sand," she said.
"Those who cling to the status quo may be able to hold back the full impact of their countries' problems for a little while, but not forever.
"If leaders don't offer a positive vision and give young people meaningful ways to contribute, others will fill the vacuum."
Protests over unemployment and food prices have also broken out in Algeria, Jordan and even Saudi Arabia in recent weeks, all countries with a high proportion of young people, many well-educated but jobless.
Egypt, the most populous Arab country, has been hit by sectarian violence while also facing a growing Islamist opposition.
While Mr Ben Ali has not only supported the United States and implemented free market reforms, opposition activists complain that the only people to benefit have been Mr Ben Ali's family and cronies.
Diplomatic cables released by Wikileaks gave an American assessment that corruption was getting worse.
"Whether it's cash, services, land, property, or yes, even your yacht, President Ben Ali's family is rumoured to covet it and reportedly gets what it wants," said Robert Godec, the ambassador.
Recent violence began after a young graduate, Mohamed Bouazizi, killed himself by setting himself alight in the town of Sidi Bouzid last month. He had been forced to become a fruit and vegetable seller through lack of work, but his stall was confiscated as he did not have a licence.
After another young man killed himself by touching an electric cable while shouting "no for misery, no for unemployment", youths took to the streets, smashing shops and setting fire to cars. The protests spread across the country encouraged by Facebook sites and Twitter accounts dedicated to the men's memory.
Youtube videos show young men tearing down some of the huge posters of Mr Ben Ali that adorn public buildings and setting light to them.
Egypt, where President Hosni Mubarak has ruled for 30 years, Jordan and Saudi Arabia, governed by monarchies, and Yemen, whose president has been in power since 1978, are all central to US policies in the Middle East. But they have also faced recent protests from overwhelmingly young populations.
Lahcen Achy, an economist with the Carnegie Endowment, said Tunisia was a special case because the high level of education it had given its young was at such odds with the lack of political and economic opportunity.
But he said neighbours faced their own problems. "The risk for Egypt and other countries might come from rising food prices," he said. "I think that all the governments in the region are thinking about what kind of announcements to make. They will try to make concessions before it is too late."
