Pedestrians and cars returned to Sanaa streets where pitched battles in nearly a week of fighting killed at least 115 and raised global worries over the impoverished country perched next to a crucial shipping lane through which about 3 million barrels of oil pass daily.
The latest violence, pitting Saleh's forces against members of the powerful Hashed tribe led by Sadeq al-Ahmar, was the bloodiest since pro-democracy unrest erupted in January and was sparked by Saleh's refusal to sign a separate power transfer deal.
The ceasefire deal included a withdrawal of armed tribesmen from government buildings and moves to normalize life in the Hasaba district of Sanaa, where fighting with machine guns, rocket propelled grenades and mortars led thousands of residents to flee the city for their safety.
Despite the truce, analysts are concerned fighting could flare again given the animosity between the groups and growing popular anger at Saleh for not ending his nearly 33-year-long rule which has brought the country near financial ruin.
The truce also extends to areas outside of Sanaa where tribesmen have clashed with the president's Republican Guards and air force fighters have strafed armed tribesman with bombs.
The political crisis has already cost the economy as much as $5 billion and immediate aid is needed to prevent a meltdown in the country with a nominal GDP of $31 billion, Yemen's trade minister told Reuters on Saturday.
TRIBAL RIVALRIES
The United States is concerned that tribal rivalries are complicating efforts to reach a power transfer deal and believes al Qaeda is trying to exploit instability there, senior U.S. officials said on Saturday.
"Tribal as well as extremist elements are attempting to exploit the current instability in order to advance their own parochial interests," one official said.
International negotiators have become exasperated with Saleh, saying he had repeatedly imposed new conditions each time a Gulf-led transition agreement was due for signing, most recently demanding a public signing ceremony.
Nearly 300 people have died over the past months as the president has tried to stop pro-reform protests by force.
But global powers have little leverage to influence events in Yemen, where tribal allegiances are the most powerful element in a volatile social fabric and the fighting already appears to be playing out along tribal, quasi-feudal lines.
A growing concern for the outside world is that the Yemen-based al Qaeda in the Arabian Peninsula (AQAP) will exploit the political instability to build on its proven talent for daring and inventive bombing plots, analysts said.
The United States and Saudi Arabia, both targets of foiled attacks by the AQAP, are worried growing chaos could embolden the militant group.
In the south, dozens of armed men believed to be from al Qaeda appeared on Saturday to have full control of city of Zinjibar in the flashpoint province of Abyan.
Also in southern Yemen, three French aid workers went missing and a local security official said on Saturday they were believed to have been abducted.
Kidnappings of Western tourists or workers by disgruntled tribes seeking ransom or concessions from the government have been frequent in Yemen. Most hostages have been freed unharmed.