Palestinian PM Salam Fayyad has resigned, after a long-running dispute with President Mahmoud Abbas.
Official Palestinian news agency Wafa said Mahmoud Abbas accepted Salam Fayyad’s resignation after they met in person.
The president asked him to remain as caretaker until a new government is formed.
Salam Fayyad’s resignation is a major blow for US efforts to restart the long-stalled peace process with Israel.
His resignation is the climax of long-running and increasingly bitter dispute between the prime minister and the president.
They have been at odds over economic policy since Finance Minister Nabil Kassis quit last month, and rumors were rife that Salam Fayyad would step down.
Salam Fayyad accepted Nabil Kassis’s resignation, but he was subsequently overruled by Mahmoud Abbas, challenging his authority.
Mahmoud Abbas reportedly waited several days before accepting Salam Fayyad’s resignation.
It comes despite recent attempts by US Secretary of State John Kerry to reconcile the two men.
Salam Fayyad, 61, was seen as a key person in US attempts to restart peace negotiations with Israel.
Mahmoud Abbas may now struggle to replace him with someone who can match his level of international credibility.
He is expected to name a new prime minister within days.
Salam Fayyad has been prime minister of the Palestinian Authority since 2007.
A former IMF official, he is widely respected among international organizations and donors.
He is considered a liberal and politically independent, being a member of neither Mahmoud Abbas’s Fatah party, nor of rivals Hamas, who control the Gaza Strip.
In recent months Salam Fayyad has proved unpopular with both parties, partly due to his economic policies at a time when the Palestinian Authority is in financial crisis.
Hamas welcomed Salam Fayyad’s decision to stand down. Spokesman Fawzi Barhoum said he and his government “worked to protect the Zionist occupation and US interests”.