Prime minister's intransigence was seen as adding to crisis in the north.
Nouri al-Maliki, Iraq’s prime minister for the past eight years, says he is relinquishing the post to fellow Dawa Party member Haider al-Abadi.
Al-Maliki says his decision is based on his desire to "safeguard the high interests of the country," adding that he will not be the cause of any bloodshed.
"I will stay a combat soldier to defend Iraq and its people," he added in the televised address late Thursday, with al-Abadi standing by his side.
Iraq’s President Fouad Massoum named al-Abadi on Monday to form the next government, but al-Maliki had until now refused to step aside.