Palestinian President Yasser Arafat has accepted the resignation of his prime minister, Mahmoud Abbas, in a move seen as a major blow to U.S. and international peace efforts.

Palestinian officials say Mr. Arafat asked Mr. Abbas to serve as a caretaker prime minister until a new Palestinian cabinet is formed.

Mr. Abbas, who is considered a moderate Palestinian, had served only a little more than three months before announcing his decision to quit.

He had hinted at his resignation on Thursday, when he asked the Palestinian Legislative Council to either give him a renewed mandate to stay in power or "to take it back".

Mr. Abbas's resignation follows a bitter power struggle with Mr. Arafat, who had refused to give up his control over key areas, including security.

The Palestinian prime minister's decision is seen as a major setback to U.S. and international efforts to promote the "road map" to peace in the Middle East. Palestinian legislators said they feared the resignation could lead the region into a further period of chaos.

Israel announced in advance of Mr. Abbas's resignation that it would not accept any successor appointed by Mr. Arafat.

Israeli Prime Minister Ariel Sharon has also hinted that he is considering sending Mr. Arafat into exile. The Israeli cabinet announced in late 2001 that it had cut off all direct contacts with Mr. Arafat.

Since then the Israeli army has largely confined Mr. Arafat to what is left of his headquarters in the West Bank city of Ramallah. Most of the complex has been destroyed in a series of sieges by the Israeli army.

The U.S. government has also isolated Mr. Arafat, refusing to invite him to any forums on Middle East peace making.