Ukraine's Prime Minister Viktor Yanukovych has resigned from his post.
Viktor Yanukovych is losing hope of being declared president
"I have made the decision and am formally submitting my resignation," he said in a televised address.
However, Mr Yanukovych refused to admit defeat in Ukraine's re-run presidential election, which was declared in favour of Western-leaning Viktor Yushchenko.
He is preparing an appeal to Ukraine's Supreme Court. "We are still fighting but I don't have much hope," he said in his New Year's Eve address.
He said he could not work with people loyal to Mr Yushchenko. "I find it impossible to occupy any post in a government headed
by these authorities," he said.
On Thursday, the Supreme Court rejected Mr Yanukovych's complaints against the conduct of the election.
The poll was re-run on Sunday after Mr Yushchenko and independent observers alleged extensive vote-rigging.
Mr Yushchenko's followers clogged the streets of the capital Kiev to demand a new vote be held.
Mr Yanukovych was blocked from parliament by Yushchenko supporters
On Wednesday they prevented Mr Yanukovych from entering the government compound to chair a regular cabinet meeting.
International observers praised the conduct of the re-run, saying it was much fairer than the earlier rounds.
Preliminary final results from the Central Election
Commission suggest Mr Yushchenko won the vote with an 8% lead over the prime minister - more than two million votes.
However, Mr Yushchenko cannot be proclaimed the winner until his rival exhausts all legal possibilities to challenge the election results.
Even before Mr Yanukovych's resignation, and although the election result is not yet official, Mr Yushchenko was naming possible candidates to become the new prime minister.
He has said he is aiming to form a broad, reform-minded coalition cabinet.