Nuri al-Maliki dropped his acrimonious bid to remain prime minister of Iraq for a third term in a televised appearance alongside his designated successor on Thursday.
"I announce before you today... to facilitate the progress of the political process and the formation of the new government, to withdraw my candidacy in favour of the brother Doctor Haidar al-Abadi," Maliki said.
President Fuad Masum on Monday tasked Abadi, a member of Maliki's Dawa party, with forming a new government, a move the two-term premier said was a violation of the constitution.
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Tehran and Washington, the two main foreign power brokers in Iraq, came out in support of Abadi, and Maliki was dealt another major blow when the office of Iraq's top Shiite cleric released a letter in which he called for the incumbent premier to go.
Maliki went from relatively unknown exile to become a powerful premier who has been widely criticised for authoritarian tendencies.
His tenure will end with Iraq facing a major crisis to which his policies have contributed.
Jihadist-led militants are in control of major areas of five Iraqi provinces, after launching an offensive in June that swept aside security forces, of which he is the commander-in-chief.