Hong Kong chief executive Tung Chee-hwa has resigned as the head of government in the former British colony.
Mr Tung denied that Beijing had forced him to quit
He told a news conference that he was stepping down after eight years because of declining health.
However, many observers in Hong Kong believe that he was in fact sacked by the Chinese leadership.
He had faced growing unpopularity over failed plans for an anti-subversion bill and his continued support for Beijing in limiting democratic reforms.
It is the first leadership change since Hong Kong returned to Chinese rule in 1997.
Mr Tung told a news conference that he had tendered his resignation as Hong Kong's chief executive an hour earlier, two years before his term was due to end.
He denied that he had been sacked and said he was leaving to become vice-chairman of the Chinese People's Political Consultative Conference in Beijing after a period of rest.
He said working long hours had taken a toll on his health and he could no longer work what he described as a "punishing schedule".
He said doctors had told him he had to change the way he worked and lived.
"The work is very heavy, the responsibility is huge and of course, I feel a tremendous sense of responsibility," he added.
Mr Tung looked back on his time in charge of Hong Kong, saying that he and the territory's people had "embarked on a road never before travelled" when he was appointed eight years ago.
"During this time, we have successfully implemented the one country, two systems principle. For the first time in history, Hong Kong citizens began to take charge of their own affairs," he said.
Rumours of Mr Tung's impending departure began circulating last Monday after details of the 67-year-old former shipping magnate's new job emerged - a move some saw as a way of easing him out of office in Hong Kong.
Factors that had fuelled Mr Tung's unpopularity since he took over his job in 1997 included:
- Successive crises over the economy and Sars;
- His ill-fated attempt to push through a draconian security law that sparked mass protests in 2003;
- His continued support for China's efforts to limit democratic reforms in the territory.
Mr Tung's deputy, Donald Tsang - a veteran of the British civil service - is to take over from him as acting chief executive until a new permanent replacement is chosen.
Under the Basic Law, Hong Kong's mini-constitution, the Beijing-appointed 800-strong committee which chooses Hong Kong's leader must hold an election within six months.
The BBC's Chris Hogg in Hong Kong says Mr Tsang is the front-runner to fill the post on a permanent basis.
However, it is not yet clear whether Mr Tung's successor will merely serve out the remaining two years of his term or have a five-year mandate of his own.