It is being seen as the first test of public opinion since the sacking and subsequent trial of Dr Mahathir's former deputy, Anwar Ibrahim, which divided Malaysian society and led to unprecedented street protests.

Mahathir Mohamad: "The government has decided to dissolve parliament"

Dr Mahathir told a press conference that the vote would take place before the Muslim fasting month of Ramadan, which begins in Malaysia on 9 December.

Malaysia's Central Electoral Commission will chose the exact date of the poll but observers say that it could be held as early as the week after next.

The news came after Dr Mahathir cancelled a foreign trip at the last minute and held an audience with the country's king, Sultan Salahuddin Abdul Aziz Shah.

Parliament will be dissolved on Thursday, and campaigning will start immediately, Dr Mahathir said.

The BBC correspondent in Kuala Lumpur says that Dr Mahathir's National Front coalition is expected to win the election, but the size of its majority may be under threat.

She says that if the coalition loses its two-thirds majority, which it has held since Malaysia gained independence, this would be a major psychological blow for the leadership.

Surprise poll

Elections were not officially due until June, but Malaysia has been expecting an early vote for months.

However, the cancellation of Dr Mahathir's trip to South Africa for a Commonwealth summit took the country by surprise.

The BBC's Frances Harrison: "There is little doubt Dr Mahathir will win"

The decision came only hours before he had been due to depart, and many of his aides had already been sent on in advance.

Correspondents say Dr Mahathir may want to hold the election before 650,000 young people become eligible to vote next year.

Many of them are thought to be angry with the Prime Minister's treatment of his former deputy, Anwar Ibrahim, who has been jailed for abusing his official position in order to cover up allegations of sexual misconduct, and is now being tried on charges of sodomy.

Mr Anwar denies the charge, claiming that he is the victim of a political conspiracy.

Dr Mahathir smiles after reading his statement to reporters

The trial has served to unite Malaysia's socialist and Islamic opposition parties. Last month, in what they described as an historic breakthrough, they unveiled a joint election manifesto promising political and economic reforms, and accusing the government of cronyism and corruption.

The leader of the Democratic Action Party, Lim Kit Siang, said on Wednesday that the decision to hold early elections was "scandalous and outrageous" as there was no political crisis.

Dr Mahathir said he was confident of retaining his two-thirds majority, and predicted that the National Front would win back Kalantan, the only state controlled by the opposition.

He said that only foreigners thought the Anwar issue was important.

The reason for holding the election before Ramadan, he said, was to prevent the opposition using it as an opportunity to organise disturbances.

Polls can legally be held as soon as 11 days after the electoral commission sets the date for nominations.

Dr Mahathir has been called to testify at Mr Anwar's trial, but his appearance has been delayed because of Mr Anwar's ill health.

Lim Kit Siang: "Mahathir is worried about the political ferment in Malaysian society, particularly in the Malay heartland"

On Wednesday the trial judge, Arifin Jaka, also complained of severe back pain, and adjourned proceedings.

Analysts say that a showdown between Dr Mahathir and Mr Anwar in court might not be good pre-election publicity for the prime minister.

The government announced a cut in income tax and an increase in government spending last month, in what the opposition described as a "feel-good" budget intended to win votes.

Anwar's ill health has delayed a courtroom showdown with Mahathir

Finance Minister Daim Zainuddin predicted that Malaysia's economy would grow by 4.3% this year, and 5% in the year 2000, bringing to an end the country's deepest recession for four decades.

Lim said the time parliament spent debating the budget would now be wasted.

Dr Mahathir, aged 73, has been prime minister for 18 years.