The director of the Jerusalem hospital where the 77-year-old Mr Sharon was being treated said medics would be able to evaluate the damage he had sustained from a massive brain haemorrhage, as he was roused from his induced coma.
"As of tomorrow morning, we will gradually reduce the depth of the anaesthesia, then we will be able to evaluate the neurological function of the prime minister's brain," Dr Shlomo Mor Yosef told reporters.
The latest brain scan had shown signs of an improvement while all his other vital signs such as blood pressure and pulse were within normal parameters.
"To sum up, the situation is still critical but stable," he said.
The decision to rouse the prime minister was made by the team of medics who have been treating him since Wednesday night when he suffered his second stroke in less than three weeks.
Doctors appear confident they will be able to save his life but are warning that his condition will not allow him to continue the stressful job of leader.
"He will not continue to be prime minister, but maybe he will be able to understand and to speak," Jose Cohen, one of his surgeons, was quoted as saying by the Jerusalem Post newspaper.
Another Hadassah doctor told news service AFP on condition of anonymity: "We are in no doubt that we will be able to revive him ... but he will probably not be able to resume his duties.”
The doctor said that Mr Sharon risked being paralysed or suffering from other difficulties.
Israelis and world leaders have already braced themselves for the end of the Sharon era, fearing his demise would spark new turmoil in a region struggling to find the path to peace after decades of conflict.
Deputy prime minister Ehud Olmert has assumed the premier’s responsibilities for the short term.
Kadima leadership
Just days ago, Mr Sharon and his new Kadima party were on track to romp to victory in a general election scheduled for March 28.
Mr Sharon created Kadima last year after quitting his right-wing Likud party and was joined by Mr Olmert, his finance minister, and former prime minister Shimon Peres.
As Mr Sharon lay in intensive care his stand-in Ehud Olmert chaired his first regular cabinet meeting without the prime minister, pledging to ensure the government continued to function.
Mr Peres said that he would endorse Mr Olmert to head the Kadima party in the March election.
Asked on CNN whether Mr Olmert would lead the centrist party's list, Israel’s elder statesman said: "The answer is clearly yes, positively yes."
Mr Peres, a former Labor party member, said he himself would probably be part of Kadima's list of candidates on March 28, but he was not aiming to run for prime minister to succeed Mr Sharon.
"When you're a prime minister you have to spend so much time on issues that are not necessarily connected to peace," he told CNN. "I want to devote whatever time and energy I have for the peace process."
Some polls have suggested that Kadima would win more seats with Shimon Peres as leader.
Palestinian concerns
Palestinian leaders have expressed concern over possible fallout from a leadership crisis in Israeli politics following Mr Sharon’s departure.
They fear the political turmoil could upset Palestinian parliamentary elections scheduled for January 25.
Israeli police last Tuesday stopped two leading candidates from canvassing in occupied East Jerusalem prompting fresh threats for the ballot to be delayed.
But Israeli police now say they will authorise Palestinian campaigning under certain conditions in East Jerusalem.
Israel is still to announce a formal decision on whether to allow Arabs to vote at post offices in East Jerusalem.
Palestinian leader Mahmoud Abbas has vowed to cancel the election unless residents of East Jerusalem can join the democratic process.
Meanwhile, chief Palestinian negotiator Saeb Erakat has urged Mr Olmert to immediately return to the negotiating table.
Mr Erakat, in an interview with CNN, lamented Mr Sharon's "unilateralism" and said negotiations were the "only way" to end the "vicious cycle of violence and counter-violence."
"Unfortunately, he (Mr Sharon) stopped negotiations and did not make us partners," he said.
"We offer him (Olmert) our hands and urge him to consider coming back and resuming negotiations immediately, because I believe this is the only way for Palestinians and Israelis to stay the course and to save lives and to change the pattern of the way we are living now," Mr Erekat said.