The surprise declaration late on Tuesday ignited a standoff with parliament which rejected his attempt to ban political activity and censor the media, with lawmakers at one point using fire extinguishers to prevent troops from entering parliament.

A coalition of lawmakers from opposition parties said they planned to propose a bill to impeach Yoon on Wednesday which should be voted within 72 hours.

“The parliament should focus on immediately suspending the president’s business to pass an impeachment bill soonest,” Hwang Un-ha, one of MPs in the coalition, told reporters. 

Yoon told the nation in a TV address that martial law was needed to defend the country from nuclear-armed North Korea and pro-North anti-state forces, and protect its free constitutional order, although he cited no specific threats.

Within hours, South Korea's parliament, with 190 of its 300 members present, unanimously passed a motion requiring martial law be lifted, including all 18 members present from Yoon's party. The president then rescinded the declaration.

Protesters outside the National Assembly parliament shouted and clapped. “We won!” they chanted, and one demonstrator banged on a drum. 

South Korea's largest union coalition, the Korean Confederation of Trade Unions, said thousands of its members would strike until Yoon resigned and hold a rally later in the day in downtown Seoul.

Several other protests are expected, including near the National Assembly where thousands of people gathered late on Tuesday to call for blocking Yoon's order and then demand his arrest and resignation.

Some companies including Naver Corp and LG Electronics Inc advised employees to work from home.

South Korean stocks opened down around 2 percent on Wednesday, while the won steadied to trade around 1,418 to the dollar, having plunged to a two-year low.

The finance ministry promised to pour in money if needed to prop up volatile financial markets, after Finance Minister Choi Sang-mok and Bank of Korea Governor Rhee Chang-yong held emergency meetings overnight.

"We will inject unlimited liquidity into stocks, bonds, short-term money market as well as forex market for the time being until they are fully normalised," the government said in a statement.

The BOK was holding an extraordinary meeting starting at 9 a.m. (0000 GMT) on Wednesday.

After Yoon's announcement of martial law, South Korea's military had said activities by parliament and political parties would be banned, and that media and publishers would be under the control of the martial law command.

Helmeted troops briefly tried to enter the parliament building. Parliamentary aides were seen trying to push the soldiers back by spraying fire extinguishers.

The main opposition Democratic Party called for Yoon, who has been in office since 2022, to resign or face impeachment over the martial law declaration, the first in South Korea since 1980.

“Even if martial law is lifted, he cannot avoid treason charges. It was clearly revealed to the entire nation that President Yoon could no longer run the country normally. He should step down," senior DP member of parliament Park Chan-dae said in a statement.

The National Assembly can impeach the president if more than two-thirds of lawmakers vote for it. A trial is then held by the constitutional court, which can confirm it with a vote by six of the nine justices.

Yoon’s party controls 108 seats in the 300-member legislature. 

"South Korea as a nation dodged a bullet, but President Yoon may have shot himself in the foot," said Danny Russel, vice president of the Asia Society Policy Institute think tank in the United States.

The crisis in a country that has been a democracy since the 1980s, and is a US ally and major Asian economy, caused international alarm.