Only hours later, an Israeli missile strike slightly wounded the spiritual founder of Hamas.
Abbas, also called Abu Mazen, told a closed-door session of the Palestinian parliament his decision to resign, then stood and left the meeting without further comment. He later issued a statement outlining a series of reasons for the move, including what he said was Israel's unwillingness to implement its obligations under an international peace plan and apparent discord with members of Palestinian Authority.
Palestinian President Yasser Arafat appeared to accept the resignation several hours later, although Palestinian officials differed on whether the matter was final. During a meeting with 80 legislators, Arafat read Abbas' letter and discussed the situation.
"In the meeting, Arafat accepted Abu Mazen's resignation and declared his government a caretaker government," Hanan Ashrawi, a legislator at the meeting, told The Associated Press.
But others in the meeting said the resignation was not formally accepted and that instead Abbas would head caretaker government while officials discuss a solution to the crisis.
"[Arafat] said it was unfortunate that Abu Mazen has resorted to this action but he did not give any statement indicating whether he accepted the resignation or not," Labor Minister Ghassan al-Khatib told Reuters. "Other people may have misunderstood Arafat's statement. At the end of the day Arafat may accept but now he did not give a position."
Analysts said they see the apparent departure of Abbas as a major blow to international efforts to restart a political peace process for the region because Abbas is the only Palestinian leader with whom the U.S. and Israel have said they would negotiate.
During his four-month tenure as prime minister, Abbas enjoyed the support of the international community, but faced criticism from some within the Palestinian Authority that said he was not representing the interests of the Palestinian cause.
Israeli Prime Minister Ariel Sharon's office issued a statement saying it would hold off a formal reaction, for now.
"Israel is monitoring the developments, and says it will not accept a state of affairs in which control over the Palestinian Authority reverts back to Yasser Arafat or one of his loyalists," the statement read.
American foreign policy leaders and the White House had no immediate comment, but Homeland Security Secretary Tom Ridge said Abbas' resignation would slow any negotiating effort.
"There was great promise there, great hope there, but [Abbas] was consistently being undermined by elements within the Palestinian Authority," Ridge said. "Arafat has not been a partner in this effort, has not provided a path to peace."
British Foreign Secretary Jack Straw called Abbas's resignation "a further difficulty" for advocates of a political peace in the Middle East.
"It is a huge tragedy that the Palestinians should be so divided," Straw told reporters.
If Arafat formally accepts the resignation he has three weeks to appoint a replacement. In the interim, Abbas and his Cabinet would stay in place, according to wire reports.
As the political drama played out largely in the West Bank, in Gaza, Israelis forces launched a missile strike that slightly injured the founder of Hamas, Sheik Ahmed Yassin, and injured at least 15 others.
Yassin, the wheelchair-bound cleric and spiritual leader of Hamas, was reportedly treated for a small hand wound at a hospital in Gaza City, where thousands gathered to denounce the bombing.
An unnamed senior Israeli military official told the AP the strike was an attempt to kill Hamas' top three leaders as they met, but that the strike failed because it had used a relatively small bomb to limit civilian casualties.
A son of a senior aide with the Hamas leader during the strike, told the Associated Press that both his father and Yassin were well.
"I just contacted my father, and he told me that God protected his life and the life of the sheik," the AP quoted Abdelsalam Hanieh as saying. "They are doing very well. The Zionists have failed in this crime, and he and the sheik are in a safer place."
Hamas leaders responded to the attack by threatening to assassinate Israeli Prime Minister Ariel Sharon.
"We warn Sharon that his head is now wanted by our troops," leaders of Hamas' military wing said via loudspeaker at a Gaza City hospital.
Even as news was coming out about the missile strike, the European Union was announcing a decision to join the U.S. in labeling Hamas a terrorist organization.
"A consensus emerged to decide on putting Hamas on the list of terrorist organizations," French Foreign Minister Dominique de Villepin told reporters. France had objected to earlier efforts to outlaw the Palestinian militant movement.