Kyrgyz President Kurmanbek Bakiyev has signed a new constitution that limits his powers and give more authority to legislators.
Opposition leaders celebrated after parliament passed the charter
The document, approved by parliament on Wednesday, is an effort to end mounting protests in the capital Bishkek.
The opposition had accused Mr Bakiyev of delaying tactics and failing to keep promises made when he came to power in last year's so-called Tulip revolution.
They said he should quit if he failed to agree to the new constitution.
Mr Bakiyev signed the new document at a ceremony watched by journalists.
"The new constitution of the Kyrgyz republic... is the result of the agreement between the different political forces and one more step toward democracy in our country," he said.
TULIP REVOLUTION WILTS
March 2005 - Former President Akayev ousted in popular protest
July - Kurmanbek Bakiyev elected President
April 2006 - Thousands protest for end to corruption and crime
November - Opposition calls for constitutional reform and curbing of presidential powers
Under the changes, which come into immediate effect, parliament not the president will form the government.
The president will have limited powers to dissolve the legislature.
"This is our victory, this is a step toward peace," opposition leader Roza Otunbayeva told demonstrators after parliament passed the constitution.
"We can avoid civil war, civil confrontation."
The document was approved by a majority of MPs in parliament late on Wednesday night.
Afterwards, demonstrators celebrated by waving flags and sparklers, having spent a week camped out in the centre of Bishkek to call for change.