Gunnlaugsson, 41, had been under pressure to resign after the leaked documents revealed that he and his wife Anna Sigurlaug Palsdottir owned an offshore company in the British Virgin Islands and had placed millions of dollars there
Iceland's Prime Minister Sigmundur David Gunnlaugsson has resigned, his party said on Tuesday, the first major political casualty after the leak of the so-called Panama Papers financial documents.
"The prime minister told (his party's) parliamentary group meeting that he would step down as prime minister and I will take over," the Progressive party's deputy leader and agriculture minister, Sigurdur Ingi Johannsson, said in a live broadcast.
The junior member of the centre-right government coalition, the Independence Party, still has to approve the switch.
Gunnlaugsson, 41, had been under pressure to resign after the leaked documents revealed that he and his wife Anna Sigurlaug Palsdottir owned an offshore company in the British Virgin Islands and had placed millions of dollars there.
Thousands of demonstrators had protested outside parliament in Reykjavik on Monday, throwing eggs and yoghurt at the building and calling on the centre-right leader to step down.
The left-wing opposition had also presented a motion of no-confidence against Gunnlaugsson.
Earlier Tuesday, President Olafur Ragnar Grimsson, who cut short a US visit to return to Reykjavik to deal with the crisis, had refused to grant Gunnlaugsson's request to dissolve parliament and call new elections.
Gunnlaugsson's offshore company, named Wintris Inc and acquired in 2007, was intended to manage his wife's inheritance from her wealthy businessman father, according to the Panama Papers.
The prime minister sold his 50-percent share to his wife for a symbolic sum of $1 at the end of 2009.
But when he was elected to parliament for the first time in April 2009, he neglected to mention his stake in his declaration of shareholdings.
He said Monday he regretted not having done so, but insisted he and his wife had followed Icelandic law and paid all their taxes in Iceland.