Kevin Rudd, who stepped down as Australia's foreign minister this week, will contest a leadership vote against prime minister Julia Gillard.

Mr Rudd's decision brings to a head a bitter leadership fight engulfing the minority government.

Mr Rudd, who was ousted as prime minister by Ms Gillard in June 2010, said Australians had lost trust in her.

He said the party was heading for an electoral wipeout at the next elections, due in late 2013, under her leadership.

"I want to finish the job the Australian people elected me to do when I was elected by them to become prime minister," Mr Rudd told reporters.

Ms Gillard called a leadership vote for Monday after Mr Rudd quit as foreign minister on Wednesday.

The prime minister is hoping the early vote will enable her to stamp her authority over the Labor Party and head off Mr Rudd's hopes of building support.

But the vote has opened deep divisions within the government, split the cabinet over which leader to support, and unleashed a wave of criticism against both Mr Rudd and Mr Gillard.

The leadership crisis was sparked by poor opinion polls, which show the government would be decimated at the next election, losing up to 15 seats.

Labor's popularity has plunged under Ms Gillard because of the introduction of contentious legislation and concessions to independent politicians and the Greens.

Ms Gillard's supporters said she has clear majority support within the Labor Party and bookmakers believe she would easily win a leadership showdown against Mr Rudd.

She has called on Mr Rudd to abandon any leadership ambitions if he loses.

Polls show Mr Rudd remains more popular with voters, and he has called for Australians to lobby their members of parliament to support his campaign to return as prime minister.

Mr Rudd said he would remain in parliament and would not mount a second challenge if he loses on Monday.

A surprise Rudd victory could spark an early election, as there is no guarantee he will win the backing of independents needed to control a majority in parliament.