French Prime Minister Edouard Philippe has tendered his resignation after heading President Emmanuel Macron's government for three years.
The president swiftly named centre-right mayor Jean Castex to lead a new team of ministers after a reshuffle.
Although Mr Philippe was considered more popular than the president, the ruling party had poor local election results at the weekend.
President Macron promised a "new path" in an interview published on Friday.
Mr Philippe met the president early in the morning and they agreed the government would resign.
A reshuffle has been expected for some time, and it is common practice for a French president to replace a prime minister during the five-year term in office known as the "quinquennat".
The Elysée palace said in a statement that Edouard Philippe had "today handed in the government's resignation to the president of the republic, who accepted it", adding that he would stay in place until a new government was appointed.
Who is Jean Castex?
Mr Castex, 55, is little known in France, but he is a senior civil servant and has played a key role in the government's response to the Covid-19 pandemic.
He has picked up the nickname "Mr Deconfinement", after Mr Philippe chose the Republicans party mayor from Prades in the Pyrenees to co-ordinate France's strategy of lifting the lockdown.
He attended the same elite university as Mr Macron and Mr Philippe and, like Mr Philippe, was previously a member of the right-wing Republicans party.
Mr Castex is due to give a TV interview later on Friday.
Why Macron is changing his team
Mr Macron came to power three years ago but now faces an economic crisis after the coronavirus pandemic.
In the interview with regional newspapers, he spoke of a "very tough" recovery for France, and focused on the immediate priority of saving jobs, as well as economic, social and environmental reconstruction.
Mr Philippe's future as prime minister had been in doubt for several weeks and he will now take up the post of mayor in Le Havre, after winning the local vote on Sunday.
A removal van and cardboard boxes were seen arriving at his Matignon residence on Friday indicating he was preparing to move out.
