Zeina Khodr, Al Jazeera's correspondent in Beirut, the Lebanese capital, said: "There was a lot of hope after the June parliamentary elections. We saw meetings between rival politicians, meetings that we would have never seen in the past, they actually sat down together and spoke.
"Lebanon's political bargaining is always very complex and fairly arcane"
Paul Salem, director,
Middle East Centre at the Carnegie Endowment for International Peace
"But real, true reconciliation has still not been achieved."
Hariri said that the conditions set by the Hezbollah-led bloc sought to undermine the election, which his Western-backed coalition had won.
Rival alliances had agreed on the broad division of seats in the cabinet, but could not agree on the details.
Under Hariri's proposal, his alliance would have had 15 seats, the Hezbollah-led minority would have had 10, and Suleiman would pick the remaining five.
However, the opposition dismissed the make up and put forward an alternative.
Al Jazeera's Khodr said: "The opposition is accusing the ruling majority of making impossible decisions.
"Some opposition sources in Lebanon think that the reason Saad Hariri has stepped down and presented this cabinet line-up is because he wants to change the formula of the cabinet's make up."
Paul Salem, the director of the Middle East Centre at the Carnegie Endowment for International Peace, told Al Jazeera: "We have to read this resignation as part of a very tough bargaining process between the majority led by Saad Hariri and the opposition, which includes Hezbollah and the movement led by Michel Aoun.
"Both have had really strong demands with respect to the formation of the government. This pushes the issue into more complex territory.
"Lebanon's political bargaining is always very complex and fairly arcane. It's always difficult to form a government.
"But the resignation of Hariri raises the issue of government formation in Lebanon to an international platform and with some regional diplomacy, it can be brought back on track."
|Tensions reached a peak in 2008 with deadly street battles in the capital [AFP]
One of the most contentious points during the negotiations was the demand
by Hezbollah and its allies that Jibran Bassil, of the Hezbollah-ally Christian Free Patriotic Movement, stay on as communication minister.
Hariri rejected this, reportedly choosing a politician closer to his own bloc for the post, Ghazi Aridi of the Progressive Socialist party, lead by Druze politician Walid Jumblatt.
Our correspondent said: ""Many observers believe the very fact that there are regional tensions is why rival politicians have not been able to reach agreement.
"We know that every Lebanese group has a regional ally. The March 14 camp is allied to Saudi Arabia, the opposition with Syria and Iran. This regional tug of war plays out in Lebanon.
"It has raised the level of tension here. People are anxious, people are worried, because in the not-to-distant past, the political crises in Lebanon actually led to violence in the street."
Suleiman is now expected to hold consultations with MPs to select a new prime minister, but with the March 14 alliance holding the majority in parliament, Hariri's mandate could simply be renewed.