Russia's government has resigned to allow President Vladimir Putin to make sweeping constitutional changes which could allow him to remain in power after his current term.
The 67-year-old has been in the top job for 20 years, longer than any other Russian or Soviet leader since Josef Stalin.
Prime Minister Dmitry Medvedev quit hours after Mr Putin proposed a reform of powers of parliament and the cabinet.
Mr Putin thanked his close ally for his contribution and asked his cabinet to keep working until a new one is formed.
The president also said he would appoint Mr Medvedev – who had been PM since 2012 – as deputy head of the presidential security council.
The Kremlin says President Putin has named tax chief Mikhail Mishustin, 53, as Russia's new prime minister.
He has worked in the government since 1998, and lacking any political weight, the decision indicates he will not play an independent role.
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Speaking in his state of the nation address, Mr Putin suggested amending the constitution to allow politicians to name prime ministers and cabinet members.
Currently, that right belongs only to the president.
He said: "It will increase the role of parliament and parliamentary parties, powers and independence of the prime minister and all cabinet members".
He also argued that the president should retain the right to dismiss the PM and their cabinet ministers – along with the power to name top defence and security officials.
But Mr Putin made it clear that any constitutional changes must be put to a national vote.
His current term ends in 2024, and under the law – as it stands – he will have to step down when it expires, as presidents are limited to serving two consecutive terms.
Mr Putin first came to power in 2000, before shifting into the prime minister's seat in 2008, where he remained for four years.
Mr Medvedev replaced him as president, before they switched roles in 2012 – and while in office, the prime minister raised the presidential term – from four to six years.
His decision to step down after one term to let Mr Putin return to the presidency sparked massive protests in Moscow, in a major challenge to the Kremlin.
Some experts claim Mr Putin could remain in charge after 2024 by returning as prime minister after making his proposed constitutional changes, which includes trimming the president's authority.
His speech made it clear he was considering the option, according to political analyst Dmitry Oreshkin.
He said: "Putin is advancing the idea of keeping his authority as a more powerful and influential prime minister, while the presidency will become more decorative".
Russian opposition leader Alexei Navalny tweeted to claim Mr Putin's speech suggested he wanted to stay in the top job after his term ends.
"The only goal of Putin and his regime is to stay in charge for life, having the entire country as his personal asset and seizing its riches for himself and his friends," he said.
Mr Putin also said changes needed to be made to ensure government officials are not allowed to have foreign citizenship or residence permits.
He spoke too, about the need to boost Russia's birth rate, and proposed payments for low-income families with small children, allowances for first-time mothers, higher payments for families with more children and the creation of extra nursery places.
During his speech, the president also said Russia would remain open for co-operation with all countries while maintaining strong defences to fend off potential threats.
And he claimed that new weapons systems would protect its security "for decades ahead."
He added: "For the first time in history, we are not trying to catch up with anyone.
"On the contrary, other leading nations are yet to develop the weapons that Russia already has".