Students whose peaceful pro-democracy protests have gripped Hong Kong on Friday agreed to hold talks with the government while vowing to continue their occupation, as the city's underfire leader refused to stand down.

Huge crowds have shut down central areas of the Chinese city with mass sit-ins all week and had set a midnight Thursday deadline for Chief Executive Leung Chun-ying to quit and for Beijing to guarantee the former British colony full democracy.

With his office besieged by thousands of protesters and tensions with police high, a defiant Leung appeared minutes before midnight rejecting calls to go, but offered talks to one prominent student group in a bid to break the impasse.

Hong Kong is set to return to work Friday after a two-day public holiday, but major roads and transport routes remain crippled by the chaos.

"I will not resign because I have to continue with the work for elections," Leung said, referring to upcoming polls in 2017 which are at the centre of the ongoing confrontation between demonstrators and the Beijing-backed city authorities.

In a concession, the chief executive said he would appoint Chief Administration Secretary Carrie Lam to lead talks with the Hong Kong Federation of Students (HKFS), one of several groups behind the demonstrations in the financial hub.

In a statement released early Friday, HKFS said they would meet Lam but renewed calls for Leung's resignation, vowing to continue their occupation if their demands were not met.

"CY Leung has already lost all his integrity and betrayed people's trust in him... His resignation is only a matter of time," HKFS said.

"Hong Kong people shall continue (their) occupying movement until genuine universal suffrage comes to light."

It was not clear when the talks will take place.

On August 31, China said Hong Kongers would be able to vote for their next chief executive, or leader, but that only candidates vetted by a loyalist committee would be allowed to stand, a decision dismissed as "fake democracy" by furious demonstrators.

Protesters divided

The offer of dialogue appeared to mollify protest leaders, who had vowed to escalate their occupation of major sites if their demands were not met.

"It is the first time since August 31 that a minister has agreed to talk to students and citizens. This is a critical moment," student leader Lester Shum told the crowds, according to the South China Morning Post.

The Occupy Central group said it welcomed the talks, adding it hoped they would "provide a turning point in the current political stalemate".

However, others were angered by the decision to talk with the embattled government and began an impromptu sit-in on Lung Wo Road, one of the few remaining carriageways around the besieged government headquarters that had remained largely free of demonstrators.

"We're here to escalate the action, this is the point of the Occupy movement," said Chris Lau, 28, a computer engineer and one of the first to sit in the road.

"The goals are still the same, true universal suffrage and for CY (Leung) to step down. Talking won't bring results, only action."

Students had debated throughout the night whether or not to fully occupy Lung Wo Road, and minor scuffles broke out between them, in a rare sign of discord.

"I don't think talking to Carrie Lam will solve the problem," student protester Karen Man told AFP. "We asked to talk to CY, not his deputy. We're peaceful and he has nothing to be afraid of."

Tensions had soared at the site earlier after police were seen transporting tear gas and rubber bullet rounds, causing widespread alarm and anger within the crowds.

Police warned protesters late Thursday that anyone rushing their cordons or attempting to break into government offices would meet "resolute enforcement actions".

Huge challenge for Beijing

China has strongly backed Leung and pledged support for police over the protests, which pose a huge challenge to its rule at a time when the Communist Party is cracking down on dissent on the mainland.

In an editorial Friday the People's Daily, the Communist Party mouthpiece, repeated Beijing's unbending response to calls for free elections.

"There is no room to make concessions on issues of important principles," the paper said, according to state news agency Xinhua.

Some analysts say it is unlikely Leung will step down, in what would be a massive loss of face for the establishment.

"If Beijing forces him to resign, they will be seen to be buckling under pressure from the protesters," said Willy Lam, a China scholar at the Chinese University of Hong Kong.

Authorities have scrubbed mentions of the protests from Chinese social media, while rights groups say more than a dozen activists have been detained on the mainland and as many as 60 others questioned for expressing support for the Hong Kong crowds.

Beijing's latest comments came after China's foreign minister issued a stern warning to the United States not to meddle in its "internal affairs".

The EU said it was concerned over the protests and called on all sides to remain calm.

Chris Patten, the last British governor of Hong Kong, welcomed the government's offer to talk with students, in comments to the BBC.

However, he called Beijing "foolish" for not trusting the people of Hong Kong to elect a suitable candidate to lead the financial hub.