MANAMA - Shi'ite protesters camped out in Bahrain's capital to press their demands for political change after a day of unrest inspired by popular revolts that toppled rulers in Tunisia and Egypt.

A funeral is planned on Wednesday morning for a man shot dead when police and mourners clashed on Tuesday at a funeral procession for Ali Mushaima, a 22-year-old killed the day before in clashes between demonstrators and security forces.

As evening fell on Tuesday, the number of protesters in the encampment at Bahrain's Pearl Roundabout dwindled to about 1,000 from an earlier 2,000, according to witnesses.

It remained to be seen whether the number would rise or fall during Wednesday. Some people will have to return to work, after a public holiday on Tuesday to mark the birthday of the Prophet Mohammed.

The demonstrators from Bahrain's Shi'ite majority say the ruling Sunni minority shuts them out of housing, healthcare and government jobs.

"The United States is very concerned by recent violence surrounding protests in Bahrain," State Department spokesman P.J. Crowley said in a statement. "We also call on all parties to exercise restraint and refrain from violence."

The main Shi'ite opposition bloc Wefaq, which boycotted parliament to protest the clampdown by Sunni security forces, said it would hold talks with the government on Wednesday.

Protesters said their main demand was the resignation of Prime Minister Sheikh Khalifa bin Salman al-Khalifa, who has governed the Gulf Arab state since its independence in 1971.

An uncle of King Hamad bin Isa al-Khalifa, he is thought to own much land and is seen as a symbol of the wealth of the ruling family.

DEMOGRAPHIC BALANCE

Activists say they also want the release of political prisoners, which the government has promised, and the creation of a new constitution.

Poverty, high unemployment and alleged attempts by the state to grant citizenship to Sunni foreigners to change the demographic balance have intensified discontent among Bahrain's Shi'ites.

Around half of the tiny island kingdom's 1.3 million people are Bahraini, the rest being foreign workers.

Analysts say large-scale unrest in Bahrain, home to the US Navy's Fifth Fleet and a regional offshore banking centre, could embolden marginalised Shi'ites in nearby Saudi Arabia, the world's biggest oil exporter.

King Hamad expressed his condolences for "the deaths of two of our dear sons" in a televised speech and said a committee would investigate the killings.

Bahrain, in a move appeared aimed at preventing Shi'ite discontent from boiling over, had offered cash payouts of around 1,000 dinars ($2,650) per family in the run-up to this week's protests.