Taiwanese Premier Frank Hsieh has announced he is resigning from office, after less than a year in the post.
Frank Hsieh was only given the job in January 2005
"I thank President Chen Shui-bian for agreeing to accept my resignation," he told a press conference on Tuesday.
Mr Hsieh's departure had been expected, following the ruling Democratic Progressive Party's huge defeat in December's local government elections.
Mr Chen told Reuters news agency he would nominate a new premier before the Lunar New Year on 29 January.
Taiwanese media have speculated that the president's former chief of staff, Su Tseng-chang, would get the job.
Since the DPP lost key mid-term elections on 3 December, Mr Hsieh's position had become increasingly untenable.
"I had offered twice to step down immediately after the polls, but agreed to stay after President Chen Shui-bian asked me to for political stability," Mr Hsieh told reporters on Tuesday.
He was appointed as prime minister in January 2005. At the time he was regarded as a skilful negotiator and a figure who could consult and build consensus with the opposition parties, according the BBC's Caroline Gluck in Taipei.
But the flagging fortunes of his party have hurt his standing, and his reputation has been further dented by scandals surrounding a subway project in the southern city of Kaohsiung.
The opposition celebrated a local election triumph in December
Parliament's decision last week to slash the budget proposed by Mr Hsieh's government could also have hastened his decision to quit, analysts say.
The DPP has faced a tough few months, and many in the party fear they are likely to lose control of the presidential palace in 2008, when Mr Chen's second term expires.
In an effort to boost the party's flagging fortunes, former Premier Yu Shyi-kun was elected as the new party chairman on Sunday.
Mr Hsieh's resignation is likely to lead to further changes within the cabinet.
As well as losing ground to the main opposition Kuomintang (KMT) party in the local elections in December, the DPP has also been accused of corruption, and has been ignored by the Chinese leadership, which has instead invited senior KMT figures to Beijing.
The two main parties in Taiwan have different strategies towards mainland China.
The DPP advocates a separate Taiwan identity, while the KMT and its allies oppose Taiwan independence and favour closer ties with Beijing.
China regards Taiwan as a breakaway province which should be reunited with the mainland, by force if necessary.