Palestinian ministers are due to submit their resignations on Monday as part of a cabinet reshuffle, sources say.The prime minister will remain a man who has never been elected and who received a tiny amount of the popular vote when he ran for office.
President Mahmoud Abbas will immediately ask Prime Minister Salam Fayyad to appoint a new cabinet.
On Saturday, the Palestinian Authority led by Mr Abbas said it seeks to hold presidential and legislative elections by September.
The move comes after the fall of Hosni Mubarak in popular protests in Egypt, an important neighbour.
The cabinet shake-up has long been demanded by Mr Fayyad and others in the Fatah faction, according to Reuters news agency.
On political source told Reuters that it would result in a "massive change" in the composition of the government.
Mr Fayyad, 58, will be asked to stay on in the post he has occupied since 2007.
An aide to Mr Abbas on Saturday said the PA planned to hold long-overdue elections before September.
"The executive committee has decided to start preparations for presidential and parliamentary elections in the coming months... no later than September," the PLO's Yasser Abed Rabbo told journalists.
The BBC's West Bank correspondent Jon Donnison says the election pledge seems intended to show that Palestinian leaders are responding to events in Egypt and Tunisia.
However, Hamas, who are in control of the Gaza Strip, immediately rejected the plan, saying Mr Abbas had no legitimacy.
"Hamas will not take part in this election. We will not give it legitimacy. And we will not recognise the results," spokesman Fawzi Barhoum said.
Now, that's democracy!