The Interior Ministry said at least 450 protesters were injured during a day of confrontations with police, who used teargas and fired in the air in an effort to disperse them. State television said 46 police were injured.
It was the second time the embassy was attacked since five Egyptian border guards were killed last month by Israelis during an operation against gunmen. That incident prompted Egypt briefly to threaten to withdraw its envoy.
Pulling Israeli diplomats even temporarily out of Egypt, the first Arab state to sign a peace treaty with the Jewish state, will shake Israel's confidence. It is already embroiled in a bitter feud with Turkey, formerly the closest of its few Muslim allies, over treatment of Palestinians.
The Cairo demonstrations continued well into the early morning hours, with police confronting at least 2,000 protesters near the embassy, a witness said.
They fired teargas and fired in the air to disperse the crowds. Protesters lit fires in the street using tyres, threw petrol bombs and stones and set at least two police vehicles alight.
Egyptian Prime Minister Essam Sharaf summoned his cabinet crisis team, which was to meet early on Saturday, state media said, while the Interior Ministry put police on alert and cancelled police holidays.
U.S. President Barack Obama called on Egypt to "honour its international obligations" and protect the Israeli mission after protesters, who had been demonstrating at Tahrir Square to push for a timetable for reforms and an end to military trials for civilians, smashed up a wall protecting the embassy building.
U.S. Secretary of State Hillary Clinton called Egyptian Foreign Minister Mohamed Kamel Amr to urge Egypt to meet its Vienna Convention obligations to protect diplomatic property, a senior State Department official said.
Israeli ambassador Yitzhak Levanon left Cairo early on Saturday, Egyptian state television said. State media earlier reported that an Israeli plane had arrived in Cairo to take the ambassador, his family and staff back to Israel.
Israel said it had asked the United States for help in guarding the embassy, located on the upper floors of an apartment block overlooking the Nile. Extra police and army vehicles had been sent to the area to protect it.
Activists who spearheaded the uprising that ousted President Hosni Mubarak on Feb. 11 have piled pressure on the ruling military council to fix a date for parliamentary and presidential elections and to get rid of senior officials who served under Mubarak.
Thousands had converged on Tahrir Square, the centre of the pro-democracy protests that toppled Mubarak, after Friday prayers for what was billed as "Correcting the Path" protests.
Some later marched to the opposite bank of the Nile in Giza. Demonstrators used hammers, large iron bars and police barricades to tear down the wall, erected this month by Egyptian authorities after daily protests over the killing of five Egyptian border guards in Sinai.
The five died during an Israeli operation against gunmen who had killed eight Israelis. Egypt threatened to withdraw its ambassador from Tel Aviv. Israel has stopped short of apologising, saying it is still investigating how the Egyptian troops were killed.
"FRUSTRATION"
Protesters scaled the embassy building, removed the Israeli flag for the second time in less than a month and burned it.
Some also tried to break into the embassy and reached the entrance hall but had not entered inside the mission itself, Israeli and Egyptian officials said.
"The embassy itself has not been breached," an Israeli Foreign Ministry official told Reuters in Jerusalem. An Egyptian security source confirmed that the embassy offices had not been entered.
The demonstrators also tried to storm the local police compound, hurled stones at the police and torched at least four vehicles. They also set a public building adjacent to the police compound on fire.
Police responded by firing teargas and blanks into the air, witnesses said.
"This action shows the state of anger and frustration the young Egyptian revolutionaries feel against Israel especially after the recent Israeli attacks on the Egyptian borders that led to the killing of Egyptian soldiers," Egyptian political analyst Nabil Abdel Fattah told Reuters.
CHEERS AS WALL CAME DOWN
Egyptian police stood aside as activists tore down the concrete wall to the cheers of hundreds of demonstrators, witnesses said.
Friday's demonstrations were organised mostly by secular groups which had been pushing for reforms, a new constitution and an end to the trial of civilians before military courts.
Islamists, including the political party set up by the Muslim Brotherhood -- Egypt's best organised political force after the dissolution of Mubarak's National democratic Party -- have distanced themselves from the planned protests.
The country's military rulers have promised to hand back power to a civilian government after elections, which they said would be held before the end of 2011. The council has also facilitated the trial of Mubarak and several of his aides, including former Interior Minister Habib al-Adli, on charges of corruption or conspiring to kill some 850 demonstrators.
