He had earlier refused to step down.
Agriculture Minister Sigurdur Ingi Johannsson told Icelandic broadcaster RUV that Gunnlaugsson was stepping down as leader of the country’s coalition government.
Earlier Tuesday, Iceland’s President Olafur Ragnar Grimsson refused to grant Gunlaugsson’s request to dissolve parliament and call for an election.
Thousands of Icelanders protested outside parliament on Monday and Tuesday demanding that Gunlaugsson resign.
Leaked financial documents allege that the prime minister and his wife set up a company in the British Virgin Islands with the help of a Panamanian law firm. Gunlaugsson is accused of a conflict of interest for failing to disclose his involvement in the company, which held interests in failed Icelandic banks that his government was responsible for overseeing.
Hundreds of people demonstrated in Reykjavik on Monday after news broke about the leaked documents. (Stigtryggur Johannsson/Reuters)
The so-called Panama Papers — legal records from the Mossack Fonseca law firm based in Panama — were published Sunday night by news organizations working with the Washington-based International Consortium of Investigative Journalists, including CBC News.
Ukraine’s president implicated
Ukraine’s fiscal service will examine the documents relating to President Petro Poroshenko’s offshore assets that were published over the weekend after a massive data leak, the head of the service, Roman Nasirov, said on Tuesday.
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