The resignation of Israeli Finance Minister Benjamin Netanyahu has sent shockwaves through Israel's political establishment, but although it sets the stage for a political leadership battle, it will not delay Israel's withdrawal from Gaza, scheduled to start next week.

Mr. Netanyahu is known for his sense of drama and his announcement Sunday was a shining example of that. It was also a political bombshell.

The finance minister chose the weekly cabinet meeting to announce he was quitting the government in protest over the upcoming disengagement, handed Prime Minister Ariel Sharon his resignation letter and then walked out of the room.

At a news conference later, Mr. Netanyahu said it was too late to stop the withdrawal, but he said he could no longer stand by and be part of what he called a terrible mistake.

He says he had stayed on, despite misgivings, to complete important economic reforms, but now, he says, the moment of truth has come and he had to act according to his conscience.

Mr. Netanyahu says he shared the desire for an exit from Gaza and for peace, but warns unilateral withdrawal is not the way forward. He predicts Gaza will become an Islamic terrorist base, once the Israelis pull out.

To some, the hawkish Mr. Netanyahu is again a hero. Dozens of orange ribbons were tied to fences and lampposts outside his house in Jerusalem -- a sign of support by settlers and other opponents of the disengagement plan.

Settler leader Pinchas Wallerstein called on other ministers to follow Mr. Netanyahu's example.

Speaking on Israel Radio, Mr. Wallerstein said others in the cabinet who oppose the disengagement should now stand up and either convince Mr. Sharon to at least postpone the pullout until a national referendum can be held on the issue or to leave the government.

There are many within Mr. Sharon's rightwing Likud Party who oppose his plan to dismantle the 21 Jewish settlements in Gaza and four small ones in the northern West Bank. Some see it as a betrayal of what they deem the Jewish birthright to the land. Others say it is a concession to Palestinian terrorism.

Mr. Sharon was one of the staunchest supporters of settlements, but now says the withdrawal is necessary for Israel's long-term security and survival as a Jewish state.

The resignation is not seen as a threat to the disengagement. After Mr. Netanyahu left Sunday's cabinet meeting, the remaining ministers voted overwhelmingly in favor of evacuating the first three Gaza settlements, beginning next Monday. And, a senior Sharon aide says preparations for the withdrawal are going ahead.

But, the resignation does have political significance and sets the stage for a challenge by Mr. Netanyahu to Mr. Sharon for leadership of the Likud party.

Mr. Netanyahu served as prime minister in the past, beginning in 1999, but was voted out three years later. He remains a favorite among arch conservatives. However, a public opinion survey published Monday in a leading Israeli newspaper showed Mr. Sharon maintaining a comfortable lead over Mr. Netanyahu, in public support.

Mr. Sharon has appointed Deputy Prime Minister Ehud Olmert as interim finance minister and assured the business community that Mr. Netanyahu's fiscal reforms and pro-market policies will remain in place.