Iceland Prime Minister Geir Haarde, speaking after his limousine had been pelted with eggs and cans by demonstrators, said the government was "fully functional."
The government is coming under fierce pressure from Icelanders who are frustrated by the handling of a financial crisis that has wreaked havoc with the island's economy. Opposition politicians and demonstrators have called for Haarde and other senior officials to resign.
"The government is still fully functional and the coalition parties are going to continue their cooperation as confirmed to me today by Ingibjorg Gisladottir," he told journalists after meeting with lawmakers from his Independence Party.
Foreign Minister Gisladottir is head of the Social Democratic Alliance, which forms a coalition government with the Independence Party.
That support was not matched by some party members in Reykjavik who passed a resolution demanding the party leave the government.
The vote by the party's biggest and most influential district, was approved at a late-night meeting surrounded by hundreds of anti-government protesters. It also demanded that general election be called no later than in May.
"The message this large body within the party is sending its leadership is very clear," said Agust Olafur Agustsson, vice chairman of the Social Democratic Alliance.
"This body is calling for an election, but until anything else is decided, we will continue to work faithfully with the Independence Party," he told Reuters after the meeting.
Anti-government and central bank protests are now regular fixtures in the once-tranquil capital after sharp currency falls and the collapse of the financial system in October caused by billions of dollars of foreign debt being incurred by banks.
Television footage from channel RUV showed protesters banging on Haarde's black limousine and then pelting it with eggds outside the government building.
The vehicle managed to drive away after riot police arrived.
The protest also left the government building splattered with eggs and paint. The demonstrators then moved off to parliament and by evening about 3,000 protesters had gathered to face riot police surrounding the Althing, hurling fire crackers at the building and chanting "disqualified government."
One demonstrator scaled the face of the parliament building, reaching a balcony from which he hung a sign reading "Treason due to recklessness is still treason."
The volcanic island's economy is expected to suffer a huge contraction this year while unemployment, once close to zero, is set to soar.
"People feel that it is incredible that after such a policy disaster that we faced last year, there has been no resignation, no minister, no one has resigned or responded, or taken responsibility for what happened," said Gunnar Helgi Kristinsson, a political scientist at the University of Iceland.
Kristinsson said there was a substantial likelihood the government would not survive the coming two weeks.
"I think it is more likely than not. It could happen today, next week or the weekend at the end of the month, especially since the Independence Party convention will be held next weekend," he said.
Haarde's Independence Party is due to begin a national congress of its members on January 29 to discuss issues which include revisiting the party's long-standing opposition to Iceland seeking membership in the European Union.
(Reporting by Omar R Valdimarsson; additional reporting by Patrick Lannin in Riga, Victoria Klesty in Stockholm and Wojciech Moskwa in Oslo; Writing by Niklas Pollard; Editing by Matthew Jones)