Obasanjo (right) will monitor whether Zimbabwe has made progress
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Commonwealth leaders meeting in Nigeria have agreed to keep Zimbabwe suspended from the body for an indefinite period.
However a statement read out a press conference said that all heads of state would work to end the suspension and promote reconciliation in the country.
A Zimbabwe Government spokesman confirmed to the BBC that the country was quitting the grouping in response.
Zimbabwe was suspended from the Commonwealth last year after an election widely seen as flawed.
Reconciliation demand
Zimbabwe's President Mugabe has threatened to leave the 54-nation group if the country is not "treated as an equal".
Nigerian President Olusegun Obasanjo has been given the crucial role of deciding whether Zimbabwe has progressed enough for it to return to the Commonwealth.
Mugabe condemned moves to extend the suspension
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When he thinks progress has been made, he will consult first a panel of six leaders and then the rest of the Commonwealth on the re-admission of the country.
But Mr Obasanjo said it was crucial that the Commonwealth saw reconciliation and interaction between the various parties and groups in Zimbabwe.
He would not comment specifically on when Zimbabwe would be able to rejoin the body, but said it would be in terms of "months rather than in terms of years".
Flying back to London from the summit, UK Prime Minister Tony Blair said it was "the right outcome" and that it was important for the Commonwealth to send "a strong signal" to Zimbabwe.
"It is now up to the Zimbabwe Government to take the decision to bring themselves back into compliance with the principles set out by the Commonwealth," he added.
BBC diplomatic correspondent Barnaby Mason says that feelings ran deep in the dispute, with South Africa and some other African states arguing that Zimbabwe should be readmitted now.
However one summit source told our correspondent that, although the states were unhappy, they could not argue that there has been huge progress in Zimbabwe towards Commonwealth standards of democracy.
However, in possible deference to their feelings, the Commonwealth statement does not say directly that the suspension will continue with no fixed time to for it to end, although that is the official position, our correspondent adds.
The summit decision followed a recommendation from a panel including Jamaica, Australia, Canada, India, Mozambique and South Africa.
Strong emotions
In a speech at the end of his Zanu-PF party's conference in Masvingo on Saturday, Mr Mugabe had threatened to pre-empt any Commonwealth decision by withdrawing from the body altogether.
McKinnon urged Mugabe not to be hasty in withdrawing from the Commonwealth
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Commenting on Zimbabwe's suspension, and his lack of an invitation to the summit in Nigeria, he likened the Commonwealth to characters in George Orwell's novel, Animal Farm, where some members are more equal than others.
Mr McKinnon urged Mr Mugabe not to be hasty.
"I would hope that President Mugabe would take breath on this one, and realise that the Commonwealth meeting here in Abuja want to engage with Zimbabwe," he said.
The BBC's Barnaby Phillips in Abuja says the strong emotions surrounding the issue have undoubtedly been causing tension.
A number of African nations had been pressing for the suspension to end, arguing that it was better to engage with Mr Mugabe than to isolate him.
Our correspondent says they resent what they consider the colonial mentality of wealthy white members of the Commonwealth - most of whose members are former British colonies.