An AFP correspondent on the scene said snipers positioned on rooftops overlooking the street opened fire on the protesters, who were being led by dissident troops from Ahmar's First Armoured Division.
Ahmar's troops returned fire and fierce clashes ensued as unarmed protesters frantically dispersed.
The latest violence followed a similarly bloody day on Saturday when troops loyal to Saleh shot dead 12 protesters from a crowd of hundreds of thousands who marched on Al-Zubeiri Street.
Seventeen other people, at least five of them civilians, were killed in clashes which erupted between Saleh loyalists on one side and pro-opposition tribesmen led by Sheikh Sadeq al-Ahmar and army units on the other.
The pro-democracy activists, who have been demonstrating since January to bring an end to Saleh's 33-year rule, voiced defiance ahead of Sunday's march.
"We will continue with our protests... even if thousands of our youth are killed," said Walid al-Ammari, a spokesman for the protesters. "This is the only way to ensure the fall of the regime," he told AFP.
In a separate protest in the flashpoint city of Taez, south of the capital, one woman was killed when government troops opened fire on demonstrators also calling for Saleh's resignation, according to medical officials.
Aziza Uthman Ghaleb, 21, was killed by sniper fire, making her the first female to die while marching in an anti-government protest since January.
Saleh on Sunday charged the protests of being militarised and part of a coup led by Islamists.
"This is a military coup d'etat (by) the Muslim Brotherhood, in coordination with Al-Qaeda, which was born out of the Muslim Brotherhood and both fall in the same category," he said in a meeting with the military top brass.
He was apparently referring to the opposition Islah (reform) Party, which is known as the Muslim Brothers of Yemen.
"How could this be a peaceful demonstration when it is backed by a dissident military force which has become (an) inherent part of the protest," he added, according to Saba state news agency.
He said the opposition, dissidents and Ahmar tribal chiefs are adamant to reach power "even if (it) would cause a river of blood."
Earlier Sunday, General Ahmar released a statement calling on the international community to take immediate action to stop the bloodshed and force Saleh to step down.
"We are calling for an urgent intervention by the international community to bring an immediate stop to the massacres by this ignorant murderer," the dissident commander said.
He said it was time for the international community to "force" Saleh to sign a deal brokered by impoverished Yemen's wealthy Gulf neighbours under which the president would transfer power to his deputy in return for a promise of immunity from prosecution.
Despite mounting pressure from Western governments as well as the six-nation Gulf Cooperation Council (GCC), Saleh has for months refused to sign the deal, even though he has repeatedly promised that he would.
Ahmar also called on all armed groups in the capital, including loyalist troops, armed tribesmen and his own dissident units, to withdraw to at least 200 kilometres (125 miles) from Sanaa.
But rival militiamen remained heavily deployed on the streets of the capital.
After prolonged medical treatment in Saudi Arabia for blast wounds he sustained in a June bomb attack on his compound, Saleh has overseen an intensified crackdown since his surprise return in September.