Palestinian Prime Minister Salam Fayyad has handed in his resignation, officials have said.
President Mahmoud Abbas accepted the resignation on Saturday and asked Fayyad to head the caretaker government, officials told the Palestinian WAFA news agency after a meeting in Ramallah.
Earlier senior Palestinian officials said Fayyad would not remain in his position.
"Fayyad has said he will not remain head of the government, even if asked to stay in his post," a high-ranking official who requested anonymity told AFP news agency, as the prime minister met Abbas at the president's headquarters.
Rumours that Fayyad would either resign or be told to step down by Abbas have been rife in recent weeks after longstanding differences between the two men came to a head over the finance portfolio.
Finance minister Nabil Qassis announced on March 2 that he was standing down.
Fayyad agreed to the resignation but Abbas, who was abroad at the time, rejected it.
Fayyad held the finance portfolio as well as the premiership before Qassis's appointment last May.
Al Jazeera's Nisreen El-Shamayleh, reporting from Ramallah, said the resignation was not a surprising move, as Fayyad had submitted his resignation many times before.
"We also know that Fatah, the inner circle of Abbas, has been criticising Fayyad a lot recently. He is a technocrat, he neither belongs to Hamas, nor to Fatah," she said.
| Mohammed Oweis, political analyst
A planned meeting on Thursday at which a senior Fatah official had said Fayyad intended to hand in his resignation was postponed after Washington insisted that to the best of its knowledge the prime minister was "sticking around".
Late on Friday, US Secretary of State John Kerry contacted Abbas by telephone to discuss the crisis regarding Fayyad, according to Palestinian officials.
El-Shamayleh said Fayyad's resignation would satisfy Fatah for now, because they feel that they have not succumbed to US pressure.
However, she said that this could affect any effort the US is making to restart negotiations between the Israelis and Palestinians.
"Last week, Kerry agreed to promote economic and development projects in the West Bank to improve the lives of Palestinians, as a way to start negotiations between the two sides, and Fayyad would have been the right person to oversee these projects," she said.
The international community credits US-educated economist Fayyad for building solid government institutions around the Palestinian Authority, ruling the occupied West Bank.
But he is considered by some in the Palestinian leadership to be too close to the US and to Israel, where the liberal Haaretz newspaper once called him "everyone's favourite Palestinian".