Premier Gordon Brown has announced he is to resign as Labour leader.
Speaking outside 10 Downing Street Mr Brown said he intended to stand down as Labour leader "in the national interest".
Mr Brown said he would ask the Labour Party to set in train the processes for a leadership election and he would not be standing.
He said he wanted his successor to be in place by the time the Labour Party meets for its annual conference, this September.
Bookies have made Southampton Itchen MP John Denham 33-1 to take over at the head of the party, behind favourite David Miliband.
Mr Brown said: "There is a progressive majority in Britain and I believe it could be in the interests of the whole country to form a progressive coalition government.
"In addition to the economic priorities, in my view, only such a progressive government could meet the demand for political and electoral change which the British people made last Thursday.
"If it becomes clear that the national interest, which is stable and principled government, can be best served by forming a coalition between the Labour Party and the Liberal Democrats, then I believe I should discharge that duty, support that government which would, in my view, command a majority in the House of Commons in the Queen's Speech and any other confidence votes.
"But I have no desire to stay in my position longer than is needed to ensure the path to economic growth is assured and the process of political reform we have agreed moves forward quickly.
“The reason that we have a hung parliament is that no single party and no single leader was able to win the full support of the country.
"As leader of my party I must accept that as a judgement on me.
“I therefore intend to ask the Labour Party to set in train the processes needed for its own leadership election.
"I would hope that it would be completed in time for the new leader to be in post by the time of the Labour Party conference. "I will play no part in that contest, I will back no individual candidate."