The direction this country will take, after months of unrest and six days of major violence in the capital, may hinge on a speech Saleh is expected to give on state television on Sunday.
Earlier on Saturday, witnesses and medics said government forces attacked the main opposition protest camp in Sanaa and killed 17 protesters and opposition-allied soldiers.
Hundreds fled from the midnight attack that lasted until noon on Saturday on "Change Square", the heart of an uprising where thousands have camped for eight months calling for Saleh to give up his 33 years of power.
Saleh's main military rival, General Ali Mohsen, said the president's return was a "major catastrophe" and called on Gulf states and Western powers to stop him from igniting a civil war.
Mohsen, who dealt a blow to Saleh in March by defecting with his troops to the protesters, said in a statement that his forces were in a position to oust the president.
"The pro-revolutionary army is capable of confrontation and can decide the situation and restore the power usurped by this gang (Saleh's family)," said Mohsen.
The fractious Arabian Peninsula nation has been rocked since January by protests demanding Saleh's ouster. President Barack Obama's administration has called for Saleh to hand over power and arrange for a presidential election by the year-end.
Protest leaders accuse Saleh's administration of corruption, violence against demonstrators and doing nothing to alleviate widespread poverty.
Yemen, one of the region's poorest countries, also faces an insurgency by al Qaeda and has an uneasy truce with Shi'ite fighters in the north and separatism in the south.
Some senior diplomats working behind the scenes to negotiate a transfer of power deal said there were "positive" signs and that opposition political groups seemed ready to work with Saleh on an accord.
Sanaa went quiet on Saturday evening after a day of clashes and shows of force when Mohsen's troops and government forces fired missiles into the air.
"This brutal aggression coincides with Ali Saleh's return from Riyadh," the protesters' National Council said. "This family regime is insistent on dragging the country into a grinding war by attacking Change Square."
"DOVE OF PEACE"
Saleh went to neighbouring Saudi Arabia in June for medical treatment for wounds suffered in an assassination attempt.
On his return on Friday, Saleh said he wanted a truce to end the fighting in the capital and that this would allow peace talks to take place.
"I return to the nation carrying the dove of peace and the olive branch," Saleh was quoted as saying by state television.
He was also quoted by state news agency Saba as calling for Sanaa to be cleared of "all armed elements" and for checkpoints and barriers to be removed.
Six protesters were killed in Saturday's attack, according to a doctor at a mosque converted into a field hospital. Also killed were 11 soldiers from Mohsen's First Armoured Division, the general's office said.
"I was doing my night (guard) shift and suddenly I heard all these explosions and I realised we must be getting shelled. The next minute, a mortar fell near me and exploded, I'm covered in shrapnel," said Yussuf al-Hamzy, 20, a Mohsen soldier.
Dozens of wounded streamed into makeshift clinics overnight.
Protesters in the opposition encampment on the 4-km stretch of avenue dubbed Change Square said buildings and tents were on fire and that protesters had retreated about half a kilometre.