Protesters flocked to the streets as Chokri Belaid's body was brought for burial
Tunisia is to form a non-partisan government of technocrats to run the country until elections can be held, the prime minister has said.
Hamadi Jebali made the announcement at the end of a day that saw a leading opposition figure killed and protests break out in several major cities.
Anti-Islamist politician Chokri Belaid was shot in the head and neck in Tunis.
His killing was the first political assassination since the Arab Spring uprising of January 2011.
He was shot dead at close range as he left for work by a gunmen who fled on the back of a motorcycle.
Announcing the new government in a nationally televised address, Mr Jebali said he had decided to form a government of "competent nationals without political affiliation".
The new ministers would have a mandate "limited to managing the affairs of the country until elections are held in the shortest possible time," he added.
'Odious assassination'
The killing of Chokri Belaid sparked an outbreak of anger across Tunisia.
Mr Belaid was leaving for work when he was targeted by gunmen
Thousands rallied outside the interior ministry, many chanting slogans urging the government to stand down and calling for a new revolution.
In the centre of Tunis, a police officer was killed during clashes between police and opposition supporters protesting against Mr Belaid's death.
The interior ministry said the 46-year-old died after being hit in the chest by stones thrown by the protesters.
Shortly before the prime minister's announcement, confirmation came in that the army had been deployed in Sidi Bouzid, the birthplace of the Arab revolution.
Mr Belaid was a respected human rights lawyer, and a left-wing secular opponent of the government which took power after the overthrow of long-serving ruler Zine el-Abidine Ben Ali.
The Popular Front (PF), a coalition of opposition groups of which Mr Belaid was a member, said it was calling for a nationwide strike on Thursday to protest against his assassination.
Opposition supporters alleged the governing Islamist party Ennahada - which Mr Belaid frequently criticised - was behind his killing.
But the party's leader Rachid Ghannouchi denounced the killing.
The Islamist-led government said Mr Belaid's murder was an "odious assassination".
Speaking in front of the European Parliament on his visit to Strasbourg, President Marzouki said the murder of Mr Belaid should not affect Tunisia's revolution.
"There are many enemies of our peaceful revolution. And they're determined to ensure it fails," he said.
Referring to Mr Belaid as a "long-standing friend", he said his "hateful assassination" was a threat.
"This is a letter being sent to us that we will refuse to open," the president said.
Mr Marzouki also announced that he was cutting short a visit to France and cancelling a trip to Egypt to return home to deal with the crisis.
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