EU foreign ministers called for free and fair election, preceded from an orderly transition trough a broad-based government.
"There needs to be a peaceful way forward based on an open and serious dialogue with the opposition parties and all parts of civil society, and we believe it needs to happen now," EU High Representative Catherine Ashton said in a statement.
Diplomats recognise that opinions around the table have differed, with some ministers sympathising with the demands of Egyptian protestors for Mubarak to step down. However, the opinion that the early departure of Mubarak could leave room for Islamic extremism and wider instability prevailed.
In the region, Israel in particular is worried that the crisis in Egypt could put an end to a bilateral peace accord signed in 1979.
Speaking in Jerusalem at a press conference with visiting German Chancellor Angela Merkel, Israeli Prime Minister Benjamin Netanyahu voiced his country's concerns.
"In a state of chaos, an organised Islamic group can take over a country. It has happened. It happened in Iran," Netanyahu said, quoted by AP.
The United States, a powerful ally of both Egypt and Israel, said Mubarak must also revoke the emergency law under which he has ruled since 1981. Washington has sent a special envoy, former ambassador to Cairo Frank Wisner, to meet Egyptian leaders.
In the meantime, Mubarak's newly appointed vice-president Omar Suleiman began talks with opposition figures and the army declared the protesters demands "legitimate" and said it would hold its fire, Reuters reported.
Suleiman, an intelligence chief named on Saturday, also said a new government sworn in by Mubarak on Monday would fight unemployment, inflation and corruption.
Foreign governments, meanwhile, scrambled to ensure the safety of their nationals trapped by the unrest in Egypt.
European airlines, including Lufthansa, Austrian Airlines and Air Berlin, said they were sending larger aircraft than usual to Egypt to meet demand and had agreed additional flights with foreign ministries.
Companies, from gas drillers to supermarkets, also pulled out staff as confrontation brought economic life to a halt. Financial markets and banks were closed for a second day.
Among the European companies to announce they had evacuated staff and families were energy groups such as BP, telecoms firm Nokia Siemens Networks and food giant Nestle.
One of Europe's largest retailers, Germany's Metro, also said two of its stores in Egypt had been looted.