The outgoing prime minister visited the mainly ceremonial president at the presidential residence in Jerusalem, where he handed in his resignation letter after 33 months in the Prime Minister's Office.

"This evening, Prime Minister Ehud Olmert submitted a letter of resignation from his post. This is not an easy decision, and I am convinced that this is a difficult evening for him," Peres said upon receiving the letter, adding that "I appreciate the respectful way in which he is handing over his power."

The political veteran thanked Olmert for his service as Mayor of Jerusalem, as Minister of Industry, Trade and Labor, and as Prime Minister, saying that "the safety of the state of Israel and the welfare of its citizens were central to his actions as Prime Minister."

Olmert ascended to the national and party leadership after Kadima party's founder, former Prime Minister Ariel Sharon suffered a severe hemorrhagic stroke in early 2006. Yet dogged by a series of police probes against him, including corruption and fraud allegations, a worn-looking Olmert announced on July 30 that he would resign upon the election of a new Kadima leader.

Last week, the three-year-old centrist party held its first-ever primary, which saw current Foreign Minister Tzipi Livni win with a slim margin and become its third and first woman leader. Earlier on Sunday, he told his cabinet that he would resign as he promised.

Following his resignation, Olmert will remain in power as caretaker prime minister, with his government as a caretaker government, till the formation of a new government.

The probes-plagued premier also said he would resign if indicted. Israeli police has recommended the state prosecution to indict Olmert, yet the prosecution has not yet made its decision.

Olmert's spokesman Mark Regev told reporters on Sunday that even if Olmert would be indicted during the interim period, he would not resign again.

POLITICAL UNCERTAINTY LINGERS

Olmert resigned, yet the political turmoil driving him out did not fade away with his resignation, with the political circle still haunted by uncertainty.

According to Israel's basic law, following Olmert's departure, President Peres will conduct consultations with parliamentary factions before he tasks a lawmaker, apparently Livni, with forming a new government. Actually, the new Kadima leader has already started her cabinet-making efforts.

As Peres is scheduled to leave on Monday for the UN General Assembly in New York, the president started the procedures immediately after receiving Olmert's resignation letter. He has also said that he would postpone his trip if necessary.

"The State of Israel today faces complicated national, security, economic and social challenges, requiring constant leadership," said Peres.

After receiving the presidential mandate, Livni will have at most 42 days to set up a new cabinet. Should the lawmaker fail, Peres may assign the task to a second and even a third lawmaker. If all the cabinet-making efforts fail, early general elections will be held, possibly in spring.

In a sign of the difficulties Livni may encounter in the bid to set up her own cabinet, Defense Minister Ehud Barak, leader of the main ruling coalition partner Labor Party, met with opposition leader Benyamin Netanyahu on Saturday, and called on Sunday for the establishment of an emergency government.

Another coalition partner, the Shas Party, also poses a threat to Livni's efforts, as the right-wing party has vowed that it will not sit in a government that would make concessions on the Jerusalem question in negotiations with the Palestinians.

Meanwhile, the Likud, the current main opposition party, has ruled out the possibility to join a Livni administration and is trying to persuade other parties to support holding early general elections.

In light of the challenges, Livni on Sunday morning called on her fellow Kadima members to be united and make concerted efforts to meet the difficulties. She also said that even if Israel has to hold snap elections, she will lead Kadima to win.

Yet recent opinion polls showed that in the case of early general elections, the Likud party would emerge as the largest winner.

The political uncertainty also casts a shadow over the sluggish peace talks with the Palestinians, and some Palestinian officials have said that Israel's political turmoil is the main reason preventing the process from making significant progress.

The election of Livni, who has been leading Israel's negotiating team during the last year, is widely seen as good news for the peace process.

Yet analysts fear that she is likely to concentrate on the cabinet-making task before she could pay serious attention to the peace track.

The Palestinian side has said that they will cooperate with Olmert and his successor to push forward the peace process, while warning that the time is running out for the two-state solution to the historical conflict.