Austrian Chancellor Werner Faymann announced his resignation on Monday, saying he lacked support for his political programme in the Social Democrat party.
The surprise move underlines the crisis the centre-left party finds itself in amid growing popular support for the far-right Freedom Party.
After a meeting with party leaders, Faymann said he would step down as head of government and as party leader.
"This government needs a powerful new start," Faymann told reporters.
The conservative Vice Chancellor and Economics Minister Reinhold Mitterlehner was named as interim chancellor, but it was unclear who might succeed Faymann permanently as head of the coalition government with Mittlerlehner's centre-right People's Party.
Vienna mayor Michael Haeupl was nominated as interim party chief of the Social Democrats.
Faymann's vulnerability became increasingly apparent two weeks ago, when the Social Democrat's presidential candidate faltered against the Freedom Party's contender, Norbert Hofer, who won the first round of presidential elections with more than a third of the votes.
The results, as well as strong polling numbers for the Freedom Party over the past 12 months, have led to a deep divide within the Social Democratic Party.
One side, led by trade unionists, leans towards anti-immigration policies and has criticized Faymann for ruling out any political cooperation with the Freedom Party.
Others want the party to return to its traditional left-wing politics.
Faymann had backed various new tough immigration policies in recent months, but it has not improved the popularity ratings of his party.
"It would have been irresponsible if we hadn't imposed measures of our own," Faymann said, pointing to the lack of EU-wide migration policies and the 90,000 asylum seekers that Austria took in last year.
Faymann took these measures "not because they were better, not because we shifted to another political direction, but because that's what reality called for," he said, acknowledging that the cabinet's decision to cap immigration had caused antagonism in his party.
In addition to these problems, Faymann's chancellorship was marked by worsening job market data and lacklustre economic growth over the past months.
Social Democratic party leaders were scheduled to hold further meetings on Monday, but party officials indicated that Faymann's successor as chancellor would not be named by the end of the day.
A few regional party leaders named Christian Kern, the current head of the Austrian Federal Railways, as a worthy candidate.