Thousands of protesters rejected the Algerian parliament's choice of an interim president on Tuesday after the resignation of Abdelaziz Bouteflika, demanding radical change after decades of domination by the ailing leader's inner circle.

The appointment of upper house chairman Abdelkader Bensalah accords with Algeria's constitution but many people oppose him because he is part of a ruling caste that has dominated Algeria since independence from France in 1962.

The choice of Bensalah angered many as protests grew in central Algiers.

"Appointing Bensalah will fuel anger and it could radicalise the protesters," said taxi driver Hassen Rahmine.

The big question is how Algeria's powerful military - long seen as a highly effective backstage player in politics - will react to Bensalah's appointment and any opposition that arises.

"I thank the army and all security services for their work," Bensalah said Army Chief of Staff Lieutenant General Gaid Salah carefully managed Bouteflika's exit, which came after six weeks of mostly peaceful demonstrations.

Salah has expressed support for protesters, who want to remove all remnants of a system that has catered to governing party figures, the army, big businessmen and union leaders who helped Bouteflika stay in power for 20 years.

Banners read: "You go means you go" and "For dignity and freedom".

On stepping down, Bouteflika promised that elections would be held after 90 days as part of a transition he said would usher in a new era.

According to the Algerian constitution, Bensalah will remain interim president until new elections are held.

"We must work to allow the Algerian people to elect their president as soon as possible," Bensalah told parliament.