Lula remained holed up inside the headquarters of a steelworkers union in metropolitan Sao Paulo with aides and allies after the federal judge's deadline of 5 p.m. (2000 GMT) to surrender to authorities. However, Lula's legal team was
negotiating his surrender with federal police, a source with knowledge of the matter told Reuters.
Federal police in Sao Paulo declined to say if they would attempt to forcibly take the former president into custody, a move that could trigger intense clashes with his supporters. A union spokesman said Lula was mulling his options with lawyers.
His legal team, which lost their last-minute appeal to a higher court, argued they had not exhausted procedural appeals and painted the case as an effort to remove Lula from the presidential race he is leading.
Hundreds of supporters filled the street outside the union headquarters, cheering defiant speeches calling the case a political witch hunt. A banner hung from the building showed Lula's smiling face on an electronic voting machine.
"We are here to show that the workers will resist this attack against democracy," said Jorge Nazareno, a union leader who said he had met briefly with Lula on Friday morning.
Lula himself had not addressed the crowd nearly 24 hours after arriving at the building, although union leaders said in an statement posted on their website that he would speak to the crowd Friday afternoon.
Many of those in the crowd, including workers, students and land rights activists, camped overnight Thursday in the streets.
The same steelworkers union in Sao Paulo's industrial suburbs where Lula sought refuge served as the launch pad for his political career nearly four decades ago, when he led nationwide strikes that helped to end Brazil's 1964-85 military
Lula's everyman style and unvarnished speeches electrified masses long governed by the elite and eventually won him two terms as president, from 2003 to 2011, when he oversaw robust economic growth and falling inequality amid a commodities boom.
He left office with sky-high approval of 83 percent and was called "the most popular politician on Earth" by former US President Barack Obama.
Lula's downfall has been as stunning as the unprecedented corruption probes that have convulsed Brazil for the last four years, jailing dozens of politicians and business leaders long considered above the law.
Federal Judge Sergio Moro, who has handled the bulk of cases in Brazil's biggest-ever graft investigation and issued Lula's prison order, wrote that he should not be handcuffed and would have a special cell in Curitiba, where he stood trial.
Lula was convicted last year for taking bribes from an engineering firm in return for help landing contracts with state-run oil company Petroleo Brasileiro SA.
Brazil's Supreme Court on Thursday rejected Lula's plea to remain free until he exhausts all his appeals, in a case he calls a political witch hunt.
The ruling likely ends his political career and blows October's election wide open, leaving Brazil's left without an obvious candidate to regain power following the unpopular current president, Michel Temer.
Under Brazilian electoral law, a candidate is forbidden from running for office for eight years after being found guilty of a crime. Rare exceptions have been made in the past, and the final decision would be made by the top electoral court if and when Lula officially files to be a candidate.
Brazilian financial markets rallied on Thursday after the Supreme Court cleared the way for Lula's imprisonment, which increased the chances of a market-friendly candidate winning the election, according to analysts and political foes.
Cassio Goncalves, a labor safety specialist at the union headquarters, said Lula's Workers Party had not considered alternatives in the presidential race.
"We have no other plan," he said. "Plan A, B and C is Lula, because he is innocent. He will be our president."