The move lets President Chen Shui-bian reshuffle his government, and a new line-up is likely to be announced soon.

Mr Chen is widely expected to name Frank Hsieh, the mayor of Kaohsiung city, as his next prime minister.

Correspondents say the reshuffle is not expected to lead to a marked change in the island's policies.

Shortly after his Democratic Progressive Party's (DPP) election defeat in December, Mr Chen himself resigned as party chairman.

The DPP and its political allies won 101 of the 225 seats in Taiwan's legislative Yuan, while the Kuomintang-led opposition won 114.

Analysts said at the time that the increasingly confrontational tone of Taiwanese politics may have persuaded voters to limit the president's powers by renewing the opposition's control over parliament.

"The cabinet has tendered its resignation," Chen Chi-mai, spokesman for the cabinet, told a news conference on Monday.

A new cabinet is expected to take office on 1 February, the day the new opposition-dominated parliament opens.

Mr Yu, who was prime minister for three years, insisted the outgoing cabinet team had not failed the people of Taiwan.

"With support of our countrymen, President Chen won re-elections in 2004... and economic conditions have improved," he is quoted as saying by the French news agency AFP.