Brian Cowen: "I have taken, on my own counsel, the decision to step down"
Mr Cowen resigned under pressure from colleagues over his handling of an economic crisis and party disputes.
But he said he would remain as prime minister until a general election he had previously set for 11 March.
Opposition politicians describe the situation as "farcical", demanding an election in February.
They intend to try and vote him out of office by tabling emergency motions in the Irish parliament, the BBC's Mark Simpson in Dublin reports.
But Mr Cowen will not go without a fight, and is determined to stay in power until mid-March, our correspondent says.
Ratings plummetThe prime minister has said the focus of the election should be policy and not personality.
Analysis
It has been an extraordinary week and next week promises to be just as interesting.
The main opposition has signalled its intention to put down a motion of no confidence on Tuesday in Brian Cowen as Taoiseach. The Labour party has already put down a similar motion of no confidence, but in the government.
The Greens would have no problem voting confidence in the government - after all they are members of the coalition - but confidence in the Taoiseach may be different.
In the Fianna Fail leadership contest, expected next week, Micheal Martin is favourite to succeed Mr Cowen. Already backbenchers have been rallying to his colours.
Finance Minister Brian Lenihan, who has been treated for pancreatic cancer, is also expected to be a leadership candidate but his star has waned because of the bail-out and because of his lukewarm endorsement of Mr Cowen last week.
In a week of political crises, Mr Cowen first survived a party leadership vote but was forced to call the election after a bungled cabinet reshuffle.
Mr Cowen faced immediate criticism for his plan to stay on as PM - the first time since 1994 a politician has been prime minister, or Taoiseach, while not leading the main party of government.
Labour leader Eamon Gilmore said it was "simply not tenable" for Mr Cowen to remain in the post.
Fine Gael leader Enda Kenny said that he would back the no-confidence motion in Mr Cowen as PM on Tuesday unless there was a dissolution of parliament.
However, Fine Gael's Michael Noonan also said it would stave off the vote, and help pass a crucial finance bill, if Mr Cowen was prepared to dissolve parliament on Friday and bring the election forward.
Sinn Fein president Gerry Adams said: "The government and Fianna Fail are in chaos. Their focus is not on the problems facing the country."
One of Mr Cowen's own Fianna Fail MPs, Charlie O'Connor, also opposed his move.
"I say this with the greatest of respect for Brian Cowen, but what he's just done is pointless and counterproductive."
Criticism of Mr Cowen has intensified this month following revelations he played golf with the former chairman of Anglo Irish Bank, Sean FitzPatrick, months before the bank was nationalised to prevent it from collapse. Mr Cowen has denied any wrongdoing.
Mr Cowen has seen his ratings plummet amid Ireland's economic crisis. The country was given a bail-out package by the European Union and International Monetary Fund last year.
'Deep affection'After the tumultuous week, Mr Cowen said: "Taking everything into account, after discussing the matter with my family, I have taken, on my own counsel, the decision to step down."
He added: "I have been in touch with no senior party figures in relation to this decision."
Brian Cowen's Rise and Fall
- Elected to the Dail in 1984 aged 24, Cowen was fast-tracked into cabinet in 1992, in time for the fat years of the "Celtic Tiger"
- Took over as finance minister in 2004. Critics accused him of failing to rein in bank lending to property developers
- Took over as PM in 2008, just before Ireland admitted it was in recession
- In November 2010, forced to accept a 85bn euro ($113bn; £72bn) EU bail-out
- On 22 January 2011, Cowen resigned as leader of Fianna Fail but clung on as PM
Mr Cowen said he had "deep affection" for the men and women who worked for Fianna Fail and wanted it to be in the best possible position to fight the election campaign.
"The focus should be on what policies the political parties are offering, rather than on the narrow focus of personality politics.
"I am concerned that renewed internal criticism of my leadership of Fianna Fail is deflecting attention from these important debates," Mr Cowen said.
The PM said: "My intention now is to concentrate fully on government business and on continuing to implement the recovery plan.
"The government will continue to govern the country."
He also vowed that the government would win the no-confidence vote on Tuesday. The coalition has a two-seat majority in parliament.
Fianna Fail has confirmed it will choose its new leader on Wednesday. Brian Lenihan, Micheal Martin and Mary Hanafin are among the leading contenders.
Mr Cowen pledged his "full support" for whoever was selected.
On Tuesday, Mr Cowen won a vote of confidence in his leadership of Fianna Fail. Minister for Foreign Affairs, Micheal Martin, who had opposed Mr Cowen, resigned.
However on Thursday, Mr Cowen bungled a planned government reshuffle. His coalition partners, the Greens, were angered by the reshuffle and blocked it. Mr Cowen then called the general election.
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