Israeli PM Ariel Sharon is leaving the Likud party which he helped establish in 1973, setting in train what could be a major realignment in Israeli politics. The BBC News website looks at the key issues.
Why is Mr Sharon leaving his party?
Ariel Sharon wants to form a centrist party somewhere between the traditional main parties of right-of-centre Likud and Labour on the left.
He wants to pursue his policy of unilateral disengagement from some occupied Palestinian land, whilst cementing Israel's hold on East Jerusalem and major settlement blocs. His hope is that he can formalise Israel's international borders along these lines.
Many in the ruling Likud party are bitterly opposed to handing land to the Palestinian Authority at all, frustrating Mr Sharon and slowing the disengagement process down.
What's the political process now?
Mr Sharon has asked Israeli President Moshe Katsav to dissolve the current parliament. Once parliament is dissolved, elections have to be held within 90 days, meaning there will be a general election in February or March 2006.
Is Mr Sharon in a strong position for the next election?
He's expected to take with him several senior Likud figures and may be joined by recently ousted Labour leader Shimon Peres.
Polls suggest that a party led by Mr Sharon would win 28 seats out of 120 in a future parliament, making it the biggest single faction, but requiring Mr Sharon to form a broad-based coalition. By contrast, the polls suggest Likud without Mr Sharon would win only 20 seats.
This said, Mr Sharon's formation of a new party is fraught with risk. Historically, centrist parties and parties formed for particular policy purposes have not done well in Israel.
Also in the background is the corruption scandal surrounding Mr Sharon's son Omri, who recently agreed to plead guilty to providing false testimony and falsifying documents. The case relates to corruption in the funding the Mr Sharon's Likud leadership campaign in 1999.
What forced Mr Sharon's hand?
There has been speculation for more than a year that Mr Sharon would abandon Likud. But he has been forced into his decision by the new Labour party leader Amir Peretz.
Mr Peretz is attempting to seize and redefine the national agenda and has precipitated an early election by promising to withdraw his party from the national unity government.
He proposes starting final status talks with the Palestinians immediately. He has proposed a bill that would give any settlement in the West Bank the same compensation deal that Gaza settlers got before being evicted if more than 60% of the settlers agree to go.
The Labour leader also wants to pursue a strong domestic agenda - raising the minimum wage, lowering the retirement age, increasing government subsidies on pensions and introducing various welfare reforms aimed at benefiting the poor.
The Moroccan-born Mr Peretz comes from a part of Israeli society that has always felt ill-treated by the Israeli elites of European descent who have traditionally dominated the Labour party. As a Sephardi - a Jew of non-European descent - he may take away one of Likud's in-built electoral strengths.
It is this, as much as Mr Sharon's attempt to grab the centre ground, that may lead to a re-alignment of Israeli politics.
What does this all mean for peace process?
If Mr Sharon pulls this off, and is re-elected in February or March, we can expect more of the same - unilateral disengagement and consolidation of Israel's hold on East Jerusalem and surrounding areas.
The Israeli prime minister has for a long time argued that current Palestinian weakness and general international backing for unilateral disengagement provide a great historical opportunity to Israel to create new and formal borders for itself.
The Palestinians see in Mr Sharon's approach a massive land grab of East Jerusalem and vast stretches of the West Bank. They warn that Mr Sharon may be able to force his policies through, but that they are a recipe for more violence and not a lasting peace that the Palestinians can live with.