Watch David Willis's report from Jakarta

President Suharto: "I decide to resign"

He made the announcement in a televised address surrounded by politicians and military leaders. His Vice-President, BJ Habibie, who is seen as a close associate, was immediately sworn in as the new president for the remainder of Suharto's term, which ends in 2003.

Protesting students cheer as Suharto goes

The news was greeted with cheering by protesting students but Amien Rais, the man who has emerged as the main leader of opposition to Mr Suharto, said he would wait to see if corrupt people join the new government before giving his endorsement to the new president.

Mr Habibie received the backing of the head of the Indonesian armed forces, General Wiranto. The general said that the Indonesian armed forces would safeguard the "former leaders of this country including Mr Suharto."

Students celebrate at the news of President Suharto's resignation

President Suharto had been under escalating domestic and foreign pressure to step down amid the country's worst political and economic crisis since he came to power in 1966.

Mr Suharto said he was standing down because he was unable to enact the gradual reforms he had proposed earlier.

"I ask for forgiveness if there were any shortcomings," said the president, who looked grim and tired. "May Indonesia remain victorious."

Exhilaration in the streets

Students say they will continue their protest

The resignation announcement was greeted with cheering and singing from thousands of students, who have been occupying the parliament building in Jakarta since Monday in a peaceful protest against Mr Suharto's rule.

Some students flung themselves into fountains while others knelt in prayer.

But at the same time, few of the demonstrators seem to believe that the occupation of the parliament could now be brought to an end.

The agenda of the students, professional people, and other protest groups, is lengthening to include changes to the electoral law, a limit to the presidential term of office and the release of political prisoners.

BBC Correspondent Jonathan Head: Jakarta is relieved but still a little uncertain

The BBC Jakarta correspondent says there will be huge relief that Mr Suharto has agreed to go without further bloodshed.