Mr Leterme's resignation has not yet been accepted by the king (left)
Belgium's King Albert II is holding emergency discussions with lawmakers following the resignation of the country's prime minister.
The king has not yet formally accepted Yves Leterme's resignation, so he remains a caretaker prime minister.
Mr Leterme resigned on Monday, after failing to get agreement on political reforms among his broad alliance.
The Flemish leader had set a 15 July deadline to push through measures to devolve more power to the regions.
Mr Leterme said the divide between the country's Dutch- and French-speakers was too deep for a resolution to be reached.
"The federal-consensus model has reached its limits," he said.
He took office in March - after nine months of political deadlock - as the head of a coalition of Dutch and French-speaking parties.
The government coalition includes Mr Leterme's Flemish Christian Democrats from the north as well as Socialists from the French-speaking region of Wallonia in the south.
Before last June's general election, Mr Leterme had promised his supporters even more devolved powers for regional governments in a country that is already Europe's most decentralised state.
In French-speaking Wallonia - where unemployment is higher and the economy sluggish - there are fears this would leave their region worse off.
"It appears that the communities' conflicting visions of how to give a new equilibrium to our state have become incompatible," Mr Leterme said in a statement on Tuesday.
He added that "state reform remains essential".
His French-speaking coalition partners said they hoped the government could be kept together.
Three federal regions: Dutch-speaking Flanders in the north; French-speaking Wallonia in the south (which has a German-speaking minority); Brussels, the capital, officially bilingual
Federal state has national responsibility for justice, defence, federal police, social security, nuclear energy, monetary policy
Regional governments oversee education, employment, agriculture, transport, environment
Deputy Prime Minister Didier Reynders urged Mr Leterme to stay on and push through the government's social and economic policies.
Belgium's Dutch and French-speaking communities seem to exist side-by-side, but with little interaction, says the BBC's Dominic Hughes in Brussels.
No single party bridges the linguistic and geographic gulf between Belgium's two regions though, traditionally, the prime minister comes from one of the majority Flemish parties.
Hardline nationalist parties, including the Flemish Interest Party, are advocating the division of the country.
Its parliamentary leader Gerolf Annemans said Flemish parties should move towards an independent Flanders by "not just pulling the little plug on the government, but the big one," referring to Belgium.