Finnish Prime Minister Matti Vanhanen has tendered his resignation to President Tarja Halonen to end seven years in office.
His resignation paves the way for 41-year-old Mari Kiviniemi to become the country’s second woman prime minister.
Ms Kiviniemi will hold talks over the weekend with the four-party government coalition.
Both Ms Kiviniemi and her new government are expected to win parliamentary confidence votes next week.
The president's office said: 'The president has accepted the government's resignation and asked it to continue on caretaker basis until the new government has been formed.'
Ms Kiviniemi is currently the minister for public administration and local government.
She has worked closely with Finance Minister Jyrki Katainen and is not expected to diverge from the government's focus on easing stimulus spending and reducing the deficit.
Mr Vanhanen, who became prime minister in 2003, said in December he would resign for health reasons.
He cited a leg operation that would require a lengthy convalescence.
