Possibly hinting at his expectation of being in power for some time, Olmert pledged to work for peace "as long as I am in my position," and said talks with Palestinians and Syria are "closer than ever" to achieving understandings.

But the internal turmoil could make it difficult for Olmert to close deals with either the Palestinians or Syria, agreements that long have eluded Israeli leaders.

Palestinian Foreign Minister Riad Malki said Olmert's decision would not change much. "It's true that Olmert was enthusiastic about the peace process, and he spoke about this process with great attention, but this process has not achieved any progress or breakthrough," Malki said. He said the Palestinians would deal with any Israeli government.

Olmert spoke as his delegation to indirect talks with Syria returned from a fourth round in Turkey. The two sides set another round for August.

Israeli political analyst Yossi Alpher said Olmert's resignation would at least slow the process. "The Arabs are asking themselves how useful an agreement with Olmert would be, because he is a self-proclaimed lame duck and he will have a hard time to get his deals approved," Alpher said.

While neither the Palestinians nor Syria would be eager to close a deal with a lame-duck leader, the prospect of Netanyahu lurking in the wings could propel them forward despite the fluid political situation.

White House spokesman Gordon Johndroe said President Bush called Olmert to pledge continued cooperation.

"Relations between the United States and Israel during Prime Minister Olmert's tenure have been exceptionally close and cooperative, and the president has appreciated his friendship, his leadership, and his work for peace," Johndroe said. "We're confident that the close United States-Israel relationship will continue in the future."

Israeli political analyst Dan Margalit, a longtime friend of Olmert who recently fell from his favor, called the decision to step down "a sad end to a miserable career."