Nepal's royalist Prime Minister Surya Bahadur Thapa has announced his resignation on national television and radio, after weeks of street protests.
"I have decided to submit my resignation to His Majesty the King, with effect from today," Thapa said on Friday.
"I hope my resignation will pave the way for building a national consensus and help establish lasting peace in the country."
Thapa's resignation came a day after a key meeting with international donors who pressed for democratic reforms and urged an end to a Maoist revolt in the aid-dependent country that has claimed over 9000 lives.
Nepal has been in political turmoil since King Gyanendra fired the elected government in 2002, replaced it with a royalist administration and indefinitely postponed elections.
Opposition groups mounted daily street protests demanding the king sack Thapa and restore multi-party democracy, and his departure could pave the way for fresh talks between the king and the opposition.
"I hope my resignation will pave the way for building a national consensus and help establish lasting peace in the country"
Surya Bahadur Thapa,
Nepal's royalist Prime Minister
But much will depend on who the king chooses to replace the 76-year-old Thapa, who was appointed last June.
Maoist rebels have been fighting a bloody revolt since 1996 to replace the monarchy with a communist republic.
Gyanendra said in March he aimed to hold fresh elections by
April 2005 but analysts said a free vote was not possible without peace with the rebels, who walked out of talks last August.