By Keith B. Richburg Washington Post Service
JAKARTA - Thousands of cheering, chanting students took over the grounds of Parliament on Tuesday, and the most outspoken critic of the Indonesian government vowed to bring ''people power'' into the streets in a mass rejection of President Suharto's plan to stage new elections and resign once a new leader is named.

The protesters are demanding that Mr. Suharto step down immediately, dismissing his proposal on Tuesday for a gradual transition as a stalling tactic that could allow him to cling to power for months.

The defiance of the students and of Amien Rais, who has positioned himself at the forefront of the country's fractured and quarreling political opposition, could lead to new confrontation with the nation's powerful military, which is seen as backing Mr. Suharto's plan for a slow turnover of power as a way to avoid the chaos of a leadership vacuum that an immediate resignation might bring.

That confrontation could come as early as Wednesday, when tens of thousands of protesters are expected to take to the streets in a show of opposition to Mr. Suharto's continued rule. The military has urged organizers to call off the protest, saying it could lead to more violence like the outburst last week that destroyed thousands of buildings and cars and left at least 500 people dead. On Tuesday night, Indonesian television ran warnings across the screen, telling viewers, ''Do not be enticed to join any demonstrations, because it might trigger rioting.''

Tanks and armored vehicles were positioned around the presidential palace and the national monument, the planned venue for the Wednesday protests, and barbed-wire barricades were positioned along a main commercial street that is the most likely route of the march.

On Tuesday morning, Mr. Suharto stunned the nation in a nationally televised address in which he said he had heard the calls for his resignation and had no interest in staying in power against the popular will.

''There is no need to worry that I will defend my right to the presidency,'' Mr. Suharto said, looking relaxed and smiling benevolently. ''I do not feel the honor of being a simple citizen is any less than the honor of being president. Let me not stand in the way of the desires of our people.''

He then promised to set up a new ''reform council'' that would draw up plans for new elections to be held ''as quickly as possible.''

The Parliament elected at that time would choose the country's new leadership. But Mr. Suharto gave no specific timetable for the transition, and said that ''at the moment, I remain president.''

He said he planned to name a new ''reform cabinet'' to help him begin carrying out needed changes.

Many at first viewed Mr. Suharto's startling resignation pledge as momentous, bringing an end to an era that began 32 years ago when the former general took over against the backdrop of similar economic and political turmoil. Some analysts said his proposal for a stage-managed resignation, and his insistence on adhering to the constitution, were aimed at both allowing him a graceful, face-saving exit while leaving him some say in choosing his successor and enough time to guarantee that his family's considerable business interests are protected.

[Mr. Suharto's comments spurred a recovery in Indonesia's currency, the rupiah, and on the Jakarta Stock Exchange, Bloomberg News reported.

[The dollar fell to 12,250 rupiah in Jakarta, from 12,700 rupiah on Monday, while the benchmark stock index jumped 6.4 percent, to 413.82 points. Companies with links to Mr. Suharto, like PT Bimantara Citra, controlled by Bambang Trihatmodjo, a son of Mr. Suharto, rose on the view that the president had bought time with his concession.]

Salim Said, a political scientist and a specialist on the Indonesian military, said Mr. Suharto's proposal was ''the best thing we can have now - the maximum we can have - so nobody loses face.''

''This shows you that Suharto is still a great politician,'' he added. ''We were about to write the requiem for Suharto. But he has found a way out that to most reasonable people is the maximum we can achieve.''

''He really wants to leave in a graceful way,'' Mr. Said said, ''and the only way he can do that is the compromise he recited this morning.''

Juwono Sudarsono, an academic who joined the cabinet as environment minister in March, said that under the plan, Mr. Suharto would be out of office by the end of the year. Mr. Juwono, in a television interview, said Mr. Suharto was trying to balance two conflicting interests: ''On the one hand, the students want him to resign immediately. On the other hand, the armed forces want to have a gradual and constitutional change.''

He said there were fears that a quick resignation ''would lead to greater chaos and disintegration of the nation.''

But to the growing number of Suharto critics - including the students on the streets and the opposition politicians trying to harness the popular discontent - the president's plans for a ''managed'' transition were viewed with suspicion.

His opponents sensed they had now seized the momentum in Indonesia's ongoing political drama, and on Tuesday their demands appeared to harden: They would accept nothing less than the immediate resignation of both Mr. Suharto and his vice president, B.J. Habibie.

''The problem with his statement was he just kept going around in circles,'' said Indra Goenawan, 20, a student at Jakarta's medical technical academy. ''We just want the president to step down - there shouldn't be any problem with that.''

The students have taken the lead in the opposition, often leaving politicians trying to keep up.

Mr. Rais, who heads the country's second-largest Moslem organization, Muhammadiyah, with 28 million members, said Mr. Suharto was ''full of illusions and hallucination'' for thinking he could stay in place to manage the transition. ''He will be defeated very soon,'' said Mr. Rais, taking an uncompromising stance. ''He does not know what is going on in his own society.''

Mr. Rais repeated his vow to bring a million people onto the streets of Jakarta and other major cities on Wednesday, the anniversary of the birth of Indonesia's nationalist movement against Dutch colonial rule. To ease fears about a leadership vacuum in the country should Mr. Suharto step down immediately, Mr. Rais offered himself as a candidate for president, saying, ''I'm more than willing to replace him.''

Emil Salim, a former cabinet member, also mentioned as a possible president, was equally critical of Mr. Suharto's proposals. ''The whole time frame is so dubious - it could be short or it could be two years,'' Mr. Salim said. ''The dubious time frame creates this uncertainty. Uncertainty is the exact reason we have this economic and political crisis.''

Some analysts said Mr. Suharto now appeared to be a victim of more than three decades of his own aloof style, and a presidency that largely sustained itself on political intrigue, secrecy and the Machiavellian manipulations of opponents real and imagined.

''There's so much logic to what he is saying, but there's so much information missing,'' said a Western diplomat. ''There's a history of misinformation - you can't ignore that,'' he said.

''I'm highly cynical,'' the diplomat added, ''I think it's a trick. I think he just wants to keep the cards that he's got - stay in for a period, and manage a process that lines up his people. He's never quit, never run.

In every spot he's been in, he's come up with a solution that's involved multiple deceptions.''

Pointing to Indonesia's backsliding on various terms of the bailout negotiated with the International Monetary Fund, the diplomat added, ''What is all boils down to is, Do you trust what this guy is saying?''