UPDATE 5: Elsewhere Oman and Saudi also fall, while Kuwait, Qatar and Bahrain rise.
UAE markets closed lower for the fourth time this week, both falling to fresh four-year troughs, as fears about the health of the economy and bank credit drove selling in properties, banks and telecos.
Dubai's index - down more than 70 percent this year - fell 2.22 percent to 1,693 points, its lowest close since Sept. 14, 2004, while Abu Dhabi's 3.69 percent decline to 2,409 points took the index to its worst finish since Nov. 18, 2004.
At 2.41 dirhams, Emaar Properties ended at its lowest close since June 10, 2004. The stock fell 3.6 percent while Arabtec Holding fell 9.93 percent.
In Abu Dhabi, telecom Etisalat tumbled 8.85 percent, Aldar Properties 6.41 percent and First Gulf Bank 6.55 percent.
"It is a matter of waves of fear because of the lack of improvement generally in the economy," said Mohammed Yasin, managing director at Shuaa Securities.
Saudi Arabia's index also fell, ending slightly lower as chemical and banking shares declined.
The measure edged down 0.09 percent to 4,743 points. Saudi Basic Industries Corp. (SABIC) shed 0.45 percent and Samba Financial Group lost 1.3 percent.
The Saudi government pledged in its 2009 budget released on Monday to keep public spending high next year, forecasting its first budget deficit in seven years on low oil prices.
Oman's index fell, tumbling almost 4 percent to its lowest close in more than 20 months, as wealthy investors sought to close positions before the end of the year.
The benchmark, closing lower for a third session, slid 3.78 percent to 5,563 points, its lowest close since April 5, 2007. Raysut Cement led declines, diving 9.98 percent.
"There are a lack of buyers and sellers are desperate," said Sankar Kailasam, head of research at Gulf Investment Services.
"A lot of year-end deleveraging is happening, people wanting to close positions, bring down their debts."
Kuwait's index posted its biggest one-day gain in more than two months as investors snapped up blue chips ahead of a government plan to inject funds into key stocks in order to boost confidence amid a regional stock market rout.
Kuwait's measure rose 2.77 percent to 8,438 points, its biggest single-day climb since Oct. 9. The finance minister said on Monday a multi-billion-dollar state fund to buy stocks would be launched on Wednesday.
Telecom Zain jumped 7.22 percent and National Bank of Kuwait 8.33 percent.
"The market is reacting to the minister of finance's statement regarding the portfolio injection," said Ammar Hajeyah, assistant manager, asset management, for local and GCC investments at Global Investment House.
"Investors are capitalising on this opportunity because all blue chips were limit down on Monday. I think the trend will reverse. All of the key stocks were limit up from the moment they opened, with huge bids."
Markets in Bahrain and Qatar also closed higher, led by industrial and banking shares.
The Qatar benchmark added 0.22 percent to 6,716 points. Industries Qatar rose 2.41 percent.
In Bahrain, Ahli United Bank and Gulf Finance House jumped 9.52 percent and 9.91 percent, respectively.
The index ended up 1.7 percent at 1,851 points, having hit its lowest close in almost four years on Monday.