Mubarak named his intelligence chief and close confidant Omar Suleiman, state television reported.
Mubarak was widely seen as grooming his son Gamal to succeed him, possibly even as soon as in presidential elections planned for later this year. However, there was significant public opposition to the hereditary succession.
Suleiman's appointment comes after even more violence erupted Saturday as police opened fire on a massive crowd of protestors in downtown Cairo, killing at least one demonstrator. It was unclear if police were using live ammunition or rubber bullets.
Protestors are directing their fury squarely at Mubarak, who has ruled the country with an iron fist for three decades. Protesters are demanding for Mubarak's resignation.
The president fired his Cabinet late Friday night and promised reforms, which many doubt he will deliver.
Protestors have torched the ruling party's headquarters and have fought police presence, demanding more democracy and less corruption.
At least 74 people have been killed and officials say that number is likely to grow as more information comes in. Some 2,000 injuries have been reported.
City residents say gangs of youths, some on motorbikes, are roaming the streets, looting supermarkets, shopping malls and stores. Some gangs are reported to have made it to affluent suburban residential areas, breaking into luxury homes and apartments.
Mubarak responded to the protests by calling out the military and shutting down Internet and cellular phone service.
President Barack Obama delivered brief but forceful remarks after a tense day of protests, telling Egypt's president that government must maintain power through consent not coercion.
"I will give the new government new and precise directions to firmly deal with our current priorities," Mubarak said.
"The United States will continue to stand for the rights of the Egyptian people and work with their government in pursuit of a future that is more just, more free and more hopeful," said Obama.
The protests show no signs of stopping and have thousands of tourists scrambling to find flights out of Egypt.
Some Egyptians who made it out of Cairo were welcomed by loved ones at Los Angeles International Airport on Saturday night.
Tourism is one of Egypt's key foreign revenue generators, accounting for about 11 percent of the country's gross domestic product.
The United States on Friday cautioned its citizens to avoid nonessential travel to Egypt and urged those already in the country to remain at home or in their hotels.
Hundreds gathered in Westwood to show their support for the protestors in Egypt. Protests also took place in San Francisco, Washington DC and several overseas cities as well.
In Paris, hundreds demonstrated near the Egyptian embassy saying political change is long overdue.
The Associated Press contributed to this report.