Egyptian Deputy Prime Minister Hazem al-Beblawi, who is also the country's finance minister, resigned on Tuesday following deadly clashes in the capital that left 25 people dead, the the state-run MENA reported.
Egypt's military council rejected the resignation, MENA said late Tuesday, without giving further details.
Beblawi - one of two deputy prime ministers who also has the finance portfolio - said he tendered his resignation after Sunday's deadly clashes "which shook the security of the society, which is the government's responsibility" to ensure.
"Although the government is not directly responsible, in the end, the responsibility falls on its shoulders," Beblawi was quoted by MENA as saying.
On Sunday, 25 people were killed and more than 300 injured when a protest demonstration by Copts was attacked by the army and thugs, sparking furious condemnation of the leadership's handling of the transition from Hosni Mubarak's rule.
Military prosecutors said they have remanded 28 people in custody -- both Muslims and Christians -- for 15 days pending investigations, MENA reported.
The Supreme Council of the Armed Forces (SCAF), which took power when Mubarak was ousted in February, had tasked Prime Minister Essam Sharaf's government to immediately form a fact-finding panel to investigate the clashes.
The UN human rights office urged Egypt to ensure that any probes are conducted in an impartial and independent manner.
Rupert Colville, spokesman for the UN High Commissioner for Human Rights, urged the authorities "to ensure the impartiality and independence of any investigation undertaken into the incident."
Political and religious leaders spent Monday in crisis talks, amid fears of widespread sectarian unrest threatening an already fragile transition.
Copts were protesting on Sunday against a recent attack in which a recently renovated village church was attacked in the southern province of Aswan.
State television accused the demonstrators of firing shots that killed three soldiers, prompting fights between Christians and Muslims.
But furious Copts said the security forces attacked the demonstrators, driving vehicles into the crowd and crushing several people.
New York-based rights group Human Rights Watch has called for a "prompt, thorough and impartial" investigation, which "should specifically address the killing of at least 17 Coptic Christian demonstrators who appear to have been run over by military vehicles."
"It should also examine the role of the military and police officers in the violence," HRW said in a statement.
Thousands of people attended a service at the Coptic cathedral in Cairo late on Monday for the funerals of 17 demonstrators.
Live television showed the coffins being brought in a procession from the Copt hospital in downtown Cairo where autopsies were carried out.
Earlier on Monday, hundreds had gathered outside the Coptic Hospital, chanting slogans against the military council and its head Field Marshal Hussein Tantawi.
Copts complain of systematic discrimination, but since Mubarak's fall, tensions have also mounted between the military -- initially hailed for not siding with Mubarak -- and groups which spearheaded the revolt.
Egypt's Coptic Orthodox Church led by Pope Shenuda III accused "infiltrators" of triggering the street battle on the Nile waterfront, while the country's top Muslim official, Grand Imam Ahmed al-Tayyeb, urged the cabinet to swiftly issue a unified law on building places of worship.
The cabinet vowed on Monday to look into amending religious laws which would give Copts more guarantees to freedom of worship.
But after months of tensions, unrest and clashes, some say the measure is too little too late.
On Tuesday, leading independent daily Al-Masry Al-Youm called for the resignation of the prime minister.
"The state has lost its stature, the regime is on the verge of collapse, and Sharaf's government has run out of credit. All that is left to say is Sharaf, resign," it said in a front page editorial.
The liberal Wafd party's mouthpiece echoed the view: "After what has happened, we can say that he cannot serve as a prime minister and he must leave his post."
International calls for restraint poured in, as the Arab world's most populous nation teetered on the edge of widespread unrest, and activists feared their revolution was crumbling.
Saudi Arabia urged Egypt to exercise restraint and ensure "the unity, stability, and prosperity" of the country, said a statement posted late Monday on the official Saudi news agency SPA.
White House spokesman Jay Carney said U.S. President Barack Obama was "deeply concerned" about the violence.
A "deeply saddened" U.N. Secretary General Ban Ki-moon urged the Egyptian military authorities to defend "all faiths" in the country, while European leaders also expressed alarm.
The International Federation for Human Rights condemned the "use of excessive force by the army to control mainly peaceful demonstrations," with IFHR president Souhayr Belhassen saying this raised the question about the SCAF's ability to lead the transition.