East Timor's president accepted the resignation of independence hero Xanana Gusmao as prime minister on Monday, paving the way for a major government overhaul and a new chapter in the nation's short history.
Gusmao, who has served as either president or premier since East Timor became independent in 2002 following a long struggle against Indonesian occupation, submitted his resignation last week.
The departure of the former guerrilla fighter deprives Asia's youngest nation of a unifying figure who has helped resolve numerous crises, but analysts say it is time for Gusmao to step aside to enable a transition to a new generation of leaders.
At a Cabinet meeting, President Taur Matan Ruak announced "that he accepted the request for resignation", said the government in a statement.
It said the president would now start the process of forming a new government, and "it is expected that the constitution of the new government will be concluded at the end of this week".
A successor for 68-year-old Gusmao has not yet been announced but the frontrunner is seen as former health minister Rui Araujo. Gusmao may remain in government but in a lesser role, observers predict.
Gusmao, who spent years living in the jungle during Indonesian occupation, had signalled over the past year that he would be stepping down. But he delayed the move repeatedly as he sought to ensure everything was in place for a smooth transition.
- Easing political tensions -
Analysts say the cabinet reshuffle is likely aimed at getting rid of several ministers from Gusmao's coalition who have been accused of corruption.
It is also expected that the opposition Fretilin party will be brought into government, a move aimed at easing the half-island nation's often fraught politics.
Gusmao last week urged people "not to panic" during the transition to a new government, and called on everyone to "contribute towards stability".
East Timor has suffered bouts of unrest in the past, although recent years have been largely peaceful, allowing UN peacekeepers finally to leave the country in 2012.
Gusmao led the military wing of the Revolutionary Front for an Independent East Timor, which fought against Indonesian occupation. Before Indonesia invaded in 1975, Portugal had ruled East Timor for centuries.
He was captured by the Indonesians and imprisoned in Jakarta during the final years of the occupation, but kept up the independence struggle from behind bars.
After the Timorese voted overwhelmingly for independence in a UN-backed referendum in 1999, Gusmao returned to his homeland a hero and was elected the country's first president in 2002. He has been prime minister since 2007.
He is credited with resolving numerous crises in the chaotic early years of independence.
He urged reconciliation, persuading pro-Indonesian militiamen who had gone on a murderous rampage following the referendum to return home.
Gusmao also helped to keep a lid on communal tensions after a crisis in 2006, when soldiers sacked from the army launched a mutiny that sparked factional violence which left dozens dead and forced 150,000 into camps.
He remains hugely popular but has struggled to fulfil his pledges of improving livelihoods in the deeply poor country, and diversifying the economy away from oil and gas.