Tzipi Livni, the former head of Israel's biggest opposition party Kadima, resigned from parliament on Tuesday, a month after she lost a primary battle for leadership of her centre-right faction.
Speculation about Livni's political future swirled after she suffered defeat at the hands of her challenger Shaul Mofaz in elections held March 28. He won 61.7 percent of the vote, easily besting her.
Her widely expected announcement came as Israel waits to hear the official date for general elections which are to be brought forward from October 2013 and could be held as early as August this year.
Kadima, which won the most parliamentary seats in the 2009 elections but failed to form a government, looks set to do badly in the upcoming vote with opinion polls suggesting it could lose at least half its seats.
In her resignation speech, Livni warned Israel was sitting "on a volcano."
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"The international clock is ticking and the existence of Israel as a Jewish and democratic state is in danger," she said.
"For years, Israeli leaders have been burying their heads in the sand, occupying themselves with political exercises and spin and in that time the threat to Israel has only grown."
She has been strongly critical of Prime Minister Benjamin Netanyahu and his right-wing coalition government, and said she had no regrets about her efforts to revive peace talks with the Palestinians, which are stalled.
Livni has not said what she will do next, but hinted she might remain in politics in some capacity.
"At this stage I am leaving the Knesset, but I'm not leaving political life," she said.
Livni, 53, is a lawyer by training and became head of Kadima after its former leader Ehud Olmert resigned in the face of corruption charges.
A mother of two, she hails from a family of nationalists and began her political career in the Likud party now led by Netanyahu, leaving it along with then-prime minister Ariel Sharon for the newly formed Kadima faction.