Sri Lanka's new President, Gotabaya Rajapaksa, swore in his brother and former head of state Mahinda Rajapaksa as interim prime minister on Thursday, after the sitting premier stepped down.
Ranil Wickremesinghe announced his decision to resign after his party's candidate lost to Mr Rajapaksa in the presidential election on Saturday.
He said was resigning to make way for the new president to form his government, respecting the mandate Mr Rajapaksa received.
A refusal to resign could have resulted in a stalemate because the president cannot sack the prime minister or appoint ministers without his advice.
Neither Mr Wickremesinghe's United National Party, nor Mahinda's Sri Lanka Podujana Peramuna has an absolute majority in Parliament to form a government.
Mahinda tried to return to office last year as prime minister but was blocked by a court.
The new president is expected to appoint a 15-member interim Cabinet until the election.
Government leaders said a parliamentary election is expected about April and Mahinda is expected to be his party's prime ministerial candidate.
With Mahinda being appointed prime minister, two brothers hold the top positions in Sri Lanka's government for the first time in its history.
Gotabaya served as defence secretary when his brother was president from 2005-2015.
Together they are credited with ending a decades-long Tamil insurgency in 2009, but the military campaign has been dogged by allegations of rights abuses against civilians from the minority community. The brothers have denied wrongdoing.
The recent presidential election was largely overshadowed by Sri Lanka's deepest economic slump in more than 15 years, which followed attacks on hotels and churches on Easter Sunday that killed more than 250 people.
ISIS claimed responsibility for the attacks, which damaged Sri Lanka's crucial tourism sector.
Gotabaya's presidential campaign focused on securing the country against militant threats.
Some rights groups and minorities have expressed concerns of renewed ethnic tensions on the island after his victory.
In his first appointments, Gotabaya on Tuesday named P B Jayasundera, who was treasury chief under his brother, as his Secretary, and close ally Kamal Gunaratne, a military general, as Defence Secretary.
In a boost to his grip on power, a court on Thursday suspended a corruption case against him, citing constitutional provisions for presidential immunity.
The High Court had indicted Gotabaya in September last year on charges of using 33 million rupees (Dh674,000) in state funds to build a memorial for his parents.
The court also released his passport, which had been impounded, allowing him to make his first overseas trip as president to India next week at the invitation of Prime Minister Narendra Modi.
