Mr Abdullah's party suffered huge losses in recent elections
Malaysian PM Abdullah Badawi has said he will leave office in 2010, defying pressure to step down this December.
Mr Abdullah said his deputy, Najib Razak, would take over as head of the Umno party in June 2010.
The prime minister has been under intense pressure to resign over poor election results and high fuel prices.
This pressure was heightened recently when opposition leader Anwar Ibrahim said he was poised to seize power with the help of government defectors.
But it is not only Mr Abdullah who has been the subject of bad publicity: both Mr Anwar and Mr Najib have been accused of serious misconduct.
Mr Anwar faces allegations of sodomy - a charge he has faced before. He insists the charges have been fabricated by the government.
Mr Najib, meanwhile, has denied accusations of an affair with a Mongolian woman who was then murdered in 2006.
Mr Abdullah, whose mandate expires in mid-2013, announced his decision to step down at a news conference.
He said he had agreed with Mr Najib to hand over power but that he first wanted the opportunity to implement reforms initiated since he took office in 2003.
"There are many things and programmes I want to achieve before I hand over and I hope that Najib will continue as my deputy in carrying this out," he said, flanked by Mr Najib and Umno officials.
He said he was confident that Mr Najib would "lead the party well".
Mr Najib pledged his support for the prime minister and urged party members to back his re-election as leader in December.
Mr Najib said that the announcement marked the start of an orderly transition of power.