London, April 14 (IANS): Palestinian Prime Minister Salaam Fayyad has resigned following a dispute with President Mahmoud Abbas over the limits of the former's authority, BBC reported.

The president accepted Fayyad's resignation after they met in person, the official Palestinian news agency Wafa said. But Abbas has asked Fayyad, 61, to remain in his post until a new government can be formed.

Fayyad has served since mid-2007 as prime minister of the Palestinian Authority, the self-rule government that administers roughly 40 percent of the Israeli-controlled West Bank.

His resignation is the climax of long-running and increasingly bitter dispute between the prime minister and the president.

Both have been at odds over economic policy since finance minister Nabil Kassis quit last month, and rumours about Fayyad's stepping down were rife.

Fayyad had accepted Kassis's resignation. But he was subsequently overruled by Abbas, challenging his authority.