Australian Prime Minister Kevin Rudd has said his Labor Party will hold a leadership ballot on Thursday, just months before national elections.
Australian Prime Minister Kevin Rudd has stood down just before a leadership challenge by his deputy Julia Gillard, officials say.
Mr Rudd called a late-night news conference to announce the contest after his deputy, Julia Gillard, said she would challenge him for the post.
Ms Gillard now becomes Australia's first female prime minister.
He said he believed there was a "strong body of support" for his leadership but most commentators expect him to lose.
Mr Rudd had called a late-night news conference to announce the Labor Party ballot after Ms Gillard said she would stand.
The Labor Party has suffered a sharp drop in support in recent polls.
The leadership battle comes just months before a general election.
"Labor's message had been lost for the last few weeks, and in fact months, under the prime minister's leadership," Australian Workers Union chief Paul Howes told the Australian Broadcasting Corporation.
'Super tax'
Mr Rudd, who led Labor to a landslide election victory against the Liberal government in 2007, blamed "a number of factional leaders" within the party for plotting against him.
"I was elected by the people of Australia as prime minister of Australia," he told reporters in Canberra. "I was elected to do a job. I intend to continue doing that job."
"I believe I am quite capable of winning this ballot tomorrow. I believe there is a strong body of support for the continuation of my leadership," he added.
Ms Gillard has confirmed that she will stand in the leadership vote, to be held on 0900 on Thursday (2300 GMT on Wednesday), just hours before the prime minister is due to fly to a G20 summit in Canada.
The BBC's Nick Bryant in Sydney says Mr Rudd started this year as the most popular Australian prime minister in three decades.
He was widely expected to win the federal election expected in October with ease, not least because Australia was one of the few countries to avoid recession after the global financial crisis, our correspondent says.
But his popularity has plummeted following a number of policy setbacks, he adds.
Having once described climate change as the greatest moral challenge of our time, he shelved the centrepiece of his environmental strategy, an Emissions Trading Scheme (ETS), which led to accusations of political cowardice.
Julia Gillard could become Australia's first female prime minister
Mr Rudd then entered into an angry fight with the country's powerful mining sector over his plans for a super tax on their "super profits", which again damaged his government, our correspondent says.
But he defended his government's record, which includes signing the Kyoto Protocol on climate change and making a formal apology for the past wrongs caused by successive governments on the indigenous Aboriginal population.
"We have made mistakes on the way through, but in navigating this economy through the worst crisis the world has seen, and keeping hundreds of thousands of Australians in jobs who would otherwise have been in unemployment queues, of that I am fundamentally proud," he said.
Our correspondent says Mr Rudd has always been more popular with the public than with his colleagues - he is regarded as intellectually arrogant and aloof.
So when his approval ratings started to slump, his critics within the Labor Party moved against him, he adds.
Commentators say Ms Gillard appears to have the support of enough MPs to oust her leader, which would make her Australia's first female prime minister.
