The Palestinian cabinet has resigned, months before elections due in the summer, as the leadership sought to reaffirm its legitimacy after the collapse of talks with Israel, and uprisings in Egypt and Tunisia.
The move, which has been on the cards since last year, was announced at a cabinet meeting in Ramallah and comes after mass public protests in Tunisia and Egypt calling for democratic reforms.
Shortly after the meeting, the Palestinian prime minister, Salam Fayyad, presented the official resignation letter to the president ,Mahmud Abbas, who immediately reinstated him as prime minister and tasked him with forming a new government.
"Abbas reappointed Fayyad and asked him to form a new government," a senior official in the president's office told AFP, with a statement later saying its main focus would be to prepare for the forthcoming elections.
"President Mahmud Abbas on Monday charged Salam Fayyad with forming a new government which will be charged with the most important mission of responding to calls for presidential, legislative and municipal elections."
Plans to reshuffle the cabinet had been announced byMr Abbas in November, when he confirmed that Mr Fayyad would keep the post which he has held since 2007.
The new government, the first since May 2009, will be tasked with pushing through the final stages of Mr Fayyad's two-year plan for building the institutions of state, due to be completed by August, the statement said.
It will have to prepare for the upcoming round of elections in the West Bank, with local elections to take place on July 9 and general and presidential elections to follow, in what will be the first time the Palestinians have gone to the polls since 2006.
It will also have to grasp the nettle of peace talks with Israel, which have been on ice since late last year over an intractable dispute about Jewish settlements.
Plans for fresh elections, announced over the past week, have been firmly rejected by Gaza's Hamas rulers, who have been locked in years of bitter rivalry with the Ramallah-based Palestinian Authority of Mr Abbas, which is dominated by his secular Fatah movement.
Hamas, which took over the Gaza Strip in 2007 and kicked out Fatah forces after a week of bloody street battles, has refused to recognise Mr Abbas's authority since his term as president ended in January 2009.
His term was indefinitely extended until new elections in a bid to avoid a political vacuum.
But since then, Hamas's refusal to participate in or recognise elections called by Mr Abbas has torpedoed plans to hold a general election in January 2010 and local elections in July.
The Islamist group's stance is likely to mean elections will be held only in the West Bank.
Mahdi Abdul Hadi, a political scientist with the PASSIA think tank, told AFP that although the cabinet reshuffle had been planned, it was also driven by the looming September deadline for declaring a Palestinian state, as well as by the impasse in peace negotiations.
But he also said it was impossible to overlook the influence of "the Arab awakening" in which massive public protests demanding democratic reform brought down Egypt's Hosni Mubarak and Tunisian president Zine El Abidine Ben Ali.
"The PLO (Palestine Liberation Organisation) used this environment to meet some expectation of changing the status quo, as well as challenging the continuous separation of Palestine between the West Bank and Gaza, between Fatah and Hamas," he told AFP.
Asked whether the reshuffle was likely to involve a radical shakeup of faces in the cabinet, Mr Abdul Hadi said it would depend on how carefully Mr Abbas and Mr Fayyad had "read" the situation in Egypt and Tunisia.
"If the president and the prime minister comprehend the cry for change and take seriously (the fact) that there is no more fear among the youth, that it is full of anger because of the impasse [in talks], there will be serious change," he said.
"But if it is the same political agenda, people are not going to be satisfied, and the cry for change will be there in the streets.
"The fever of Tunis and Cairo is contagious, and nobody can stop it now," Mr Abdul Hadi said "It is going to make some changes whether we like it or not."