Three days of demonstrations led by the leftist Awami League demanding electoral reform left at least 20 dead, and President Iajuddin Ahmed immediately appealed for calm in a televised speech late Sunday.
A senior military source told AFP the army had been put on stand-by in case of further bloodshed, following deadly clashes between rival parties.
"The armed forces are on high alert. They will be on the streets the moment they are asked to keep law and order," the source said.
The political crisis came to a head after the five-year mandate of Prime Minister Khaleda Zia's Islamist-allied government ran out on Friday.
Her Bangladesh Nationalist Party (BNP) failed to strike a deal on the interim adminstration with the main opposition Awami League, which has threatened to boycott the elections.
Ahmed told the nation he had to appoint himself interim leader as there was no constitutional alternative following the collapse of talks with the opposition, which accuses the BNP of stacking the election cards in its favour.
Under the constitution, Ahmed can retain his position as president and act as the head of the interim administration which has to hold elections within three months.
"I sincerely hope we can hold the parliamentary elections smoothly within the time stipulated in the constitution and hand over power to the next government," he said.
"I urge all, irrespective of their party, to keep peace and law and order in the country," he said.
The president intervened after the deadly protests by opposition supporters over the government's original proposal to install retired Supreme Court justice K.M Hasan in the post.
The 75-year-old figurehead president, who underwent heart bypass surgery in May, had spent Sunday holding talks with the main political parties in a search for a compromise candidate.
After the talks collapsed he took the oath at the presidential palace in Dhaka in front of Zia, diplomats, dignitaries and officials. The ceremony was boycotted by the Awami League, which called protests and a nation-wide transport blockade for Monday in response.
"We have neither accepted him (the president) nor rejected him as the chief of the caretaker government. His acceptability will depend on his activities," Amir Hossain Amu, a senior Awami League leader, told AFP.
"The president should have exhausted all the constitutional options before taking over as the caretaker government chief. We think he has misused his power, but we will monitor his duties," Amu said.
In addition to opposing Hasan on the grounds that he held a senior BNP appointment in the late 1970s, the opposition also wants the Election Commissioner and his two deputies replaced.
Amu said the Awami League and allies would be pressing for the president to sack the three officials, whom they also accuse of being pro-government.
The president "should now replace all the top officials of the election commission, who we think are biased," he said.
"He also should prepare a new voters' list because we think the older one has more than 10 million fake voters," Amu said.
Six more people died in clashes between rival parties on Sunday, taking the death toll over the past three days to 20, police said. Fourteen people died on Friday and Saturday.
After Zia's mandate expired on Friday, her government was required to hand power to the interim body within 15 days.
The caretaker government system was set up to try to prevent ruling parties from poll rigging, which has plagued Bangladesh in the past.

Copyright AFP (Agence France-Presse), 2006