The state of emergency, which Morsi said would be in place for one month in Suez, Ismailia, Port Said, authorizes the president and police to use extraordinary powers, suspends the judicial process and curbs civil rights, The New York Times reported.
The declaration came after seven people were reported killed in Port Said, during a mass funeral for 33 people who were killed Saturday during protests of court verdicts on killings during a soccer riot. Egypt has undergone four days of protest around the country, including in Cairo, associated with Friday's second anniversary of the revolution that ousted former President Hosni Mubarak.
Morsi announced the state of emergency during an appearance Sunday on state television.
"There is no room for hesitation, so that everybody knows the institution of the state is capable of protecting the citizens," he said. "If I see that the homeland and its children are in danger, I will be forced to do more than that. For the sake of Egypt, I will."
Ahram Online, the government newspaper in Cairo, reported 450 were injured, three of whom were in critical condition.
Mourners at the Al-Mariam Mosque were attacked by tear gas shells from the direction of an army club nearby, the newspaper reported.
Egypt's Ministry of the Interior, on its official Facebook page, denied using tear gas at the funeral and said a number of funeral march mourners threw Molotov cocktails and fired at police stations.
The mass funeral was held for the 33 killed Saturday during protesters' rage and sporadic gunfire that erupted after an Egyptian court sentenced 21 of 73 defendants to death for killing 70 fans during a soccer riot in Port Said.
Protesters in downtown Cairo Saturday threw rocks at security forces who responded with tear gas, Ahram Online said Sunday. Police shut down all roads and highways leading to Tahrir Square.
The U.S. Embassy and the British Embassy closed offices for the day, CNN said.
The Egyptian army took control of the Suez Canal administration building and other government buildings, banks and courts in Port Said and secured water and power facilities in the city, Gen. Ahmed Mohammed Ali told CNN.
Protests were reported in Alexandria and Suez as well as other areas in the country, where demonstrators focused their anger on President Mohamed Morsi, CNN said.