President Mahmoud Abbas has accepted the resignation of Prime Minister Rami Hamdallah.
He announced last Thursday that he was quitting just two weeks after taking office.
Mr Hamdallah resigned over a conflict of authority.
Hamdallah will remain head of a caretaker government until a replacement is found.
President Abbas appointed Mr Hamdallah, a university dean and political novice, earlier this month in an apparent move to consolidate power.
Mr Hamdallah replaced internationally known economist Salam Fayyad, who had clashed with Mr Abbas.
The latest twist could prove a political distraction as Mr Abbas is focusing on a US push to restart peace negotiations with Israel.