World Bulletin / News Desk
Gusmao, 68, a guerrilla leader who helped end Indonesian rule in 2002, had hinted for more than a year that he would resign to let a younger generation lead a nation that ranks among the world's poorest, despite its abundant gas resources.
"The government confirms that the prime minister of Timor-Leste, H.E. Kay Rala Xanana Gusmão, has sent his letter of resignation from the post of prime minister to the president of the republic, H.E. Taur Matan Ruak," a government spokesman said in a statement on an official website.
"It is now for the president of the republic to consider and respond to the letter of resignation," the spokesman added.
The two leaders met this week to discuss restructuring the government.
It was not immediately clear who would succeed Gusmao though experts say front runners include former health minister Rui Araujo and state minister Agio Pereira.
After decades under Indonesian rule, East Timor has struggled to develop economically since independence. Despite gas production worth billions of dollars, about half of the country's population of 1.2 million lives in poverty, according to the World Bank.
Gusmao led guerrillas fighting for independence from the hills.
Indonesia later allowed a vote and the half island opted for independence in a violence-plagued vote in 1999. It become independent in 2002.
It was not clear what role, if any, former president and Nobel Peace Prize winner Jose Ramos-Horta would play in a new government.