President Suharto resigned at 3.00 a.m. (9 a.m. Jakarta time), after his position both at home and abroad weakened dramatically yesterday. Power is to be transferred this morning to Vice-President B.J. Habibie.
In a televised statement from the Presidential Palace Mr Suharto said he had decided to step down immediately as the country had decided his reform package was not adequate enough and "it is very difficult for me to continue to run the country". Immediately afterwards Mr Habibie took the oath based on the 1945 constitution.
The 76-year-old president's resignation comes after months of turmoil, and violent rioting in the capital last week which claimed the lives of more than 500 people. At the same time 11 cabinet ministers, including the economics minister Mr Ginandjar Kartasasmita, submitted a joint resignation letter to President Suharto, according to the major newspaper Kompas.
Mr Habibie is a crony of Mr Suharto and very unpopular with the students and Suharto critics but he has no power base and none of the steel of the outgoing president, making him amenable to opposition proposals for sweeping reforms in Indonesia's government. He is also unpopular with the international financial community because of his record of promoting subsidies to favoured firms.
The mortal blow to Mr Suharto, who ruled Indonesia for 32 years after a bloody transition of power in the 1960s was delivered by Indonesia's legislators, long considered puppets of the regime, who suddenly emerged yesterday in the forefront of the student-inspired opposition movement. They demanded that he step down by tomorrow, or face impeachment proceedings.
Meanwhile international support for the increasingly isolated Indonesian president ebbed ominously away. The US Secretary of State, Ms Madeleine Albright, yesterday urged the 76-year old president to make "an historic act of statesmanship and preserve his legacy" by leaving office now.
The IMF said it would not deliver the next instalment of aid to the Indonesian economy. Diplomats in Jakarta said the US was putting pressure on Mr Suharto to name an early date for his retirement, after announcing on Tuesday a plan to step down which could take six months.
Mr Suharto's proposals had clearly also failed to bring calm to the situation. Students continued their occupation of the Indonesian parliament in Jakarta for the third day calling for Mr Suharto's resignation, and hanged his effigy from one of the parliament buildings as thousands of demonstrators jeered and laughed.
The army faced the prospect of either condoning their action or forcing them from the building, and chose the former course, making President Suharto appear enfeebled.
The domestic tide began to run strongly against Mr Suharto late yesterday when the parliamentary faction of the ruling Golkar party, of which Mr Suharto is patron, called on him and vice-president Mr Jusuf Habibie to stand down.
Legislative leaders said they would begin proceedings on Monday to convene Indonesia's constitutional body, the People's Consultative Assembly (MPR), which would force the president to resign if he had not already done so and select a new president in less than two weeks. The MPR reelected Mr Suharto and Mr Habibie for a five-year term in March.
The Speaker of the House, Mr Harmoko, on Monday called on Mr Suharto to step down in the interests of national unity and stability, and repeated his demand after a meeting with students yesterday. On Tuesday the armed forces commander, General Wiranto, said Mr Harmoko had spoken as an individual and his call had no legal force.
Two-thirds of the 500 members of the House of Representatives can vote by simple majority for a special session of the MPR, the only body to which Mr Suharto is answerable. It comprises four factions, with 425 elected members and 75 members - mainly retired officers - nominated by Mr Suharto to represent the military.
The most prominent opponent of Gen Suharto, Muslim leader Dr Amien Rais, also said Mr Suharto was about to go. He accused him of "blatant state terrorism" in putting Jakarta under military occupation "like a garrison town".
Businesses and shops in the capital stayed closed throughout the day and the city's wide avenues, normally choked with traffic, remained deserted except for tanks and troop transport. Dr Rais called off the mass protest when he realised conflict with the army was inevitable. However, hundreds of thousands of people demonstrated against President Suharto in other Indonesian cities.