The crisis in Lebanon following the assassination of Beirut's top police official appeared to be deepening as the prime minister, Najib Mikati, announced his cabinet would resign as soon as a caretaker national unity government could be formed.

General Wissam al-Hassan was one of 10 people killed and more than 100 wounded on Friday after a car bomb exploded in a cramped middle-class Christian neighbourhood in central Beirut. The explosion rocked the Sassine Square area just after 3pm, leaving windows shattered and broken glass littering the streets.

The killing of Hassan has followed months of rising tension as Lebanon has been drawn ever deeper into the conflict in neighbouring Syria – whose government has been blamed for the murder.

Hassan was a key investigator for the Special Tribunal for Lebanon (STL), the international investigation into the 2005 assassination of former prime minister, Rafiq Hariri, and several other bombings that the Lebanese street has blamed on the Syrian president, Bashar al-Assad.

Tensions between the pro-Syrian government and an opposition that is openly backing the rebels in Syria's 18-month civil war have steadily risen over the past year and the death of Hassan, a Sunni, left supporters around the country calling for a national strike and retaliatory violence against the Shia militant group Hezbollah and its allies in the government. Hezbollah denied that it was behind the blast.

Gangs of angry protesters took to the streets on Friday night, blocking roads, burning tyres and calling on the government to resign. As protesters demanded justice and revenge, Hezbollah and its allies began deploying their gunmen to the streets to protect Shia neighbourhoods from revenge attacks by infuriated Sunnis.

Immediately after Hassan's assassination, the ruling coalition, led by Hezbollah, announced that it would block any attempt to transfer jurisdiction over the investigation into the car bombing to the STL, a move that prompted Mikati to announce that his cabinet would resign as soon as a caretaker national unity government could be formed. The dramatic announcement came after a security council meeting with President Michel Suleiman to determine the proper course forward the day after the worst bombing to strike Lebanon in the past five years.

The Lebanese government had previously thrown its support behind the STL, but after it became clear that prosecutors planned to indict members of Hezbollah in the Hariri assassination, the group's allies in the cabinet took steps to limit co-operation with the tribunal. After the cabinet refused to discuss transferring the investigation into Hassan's murder to the STL, the prime minister made his announcement that he would resign as soon as a caretaker government could be formed.

"The request for a timeframe stems from a realisation that Lebanon is facing a plan to create strife," the prime minister said. "This is a national issue and we are keen on preserving the nation. We do not want to leave Lebanon in a vacuum," he said after meeting the president.

Hezbollah has described the STL as an Israeli project to sow discord between Lebanese factions already bitterly divided over support for the rebels battling for control of Syria. Hassan was considered one of the key backers of the tribunal and sources say he had recently turned over a considerable amount of evidence in the form of telecoms records to prosecutors, in a move widely criticised by Hezbollah and its allies.

In announcing his eventual resignation, the prime minister also stated that he did not believe that Hassan had been acting in an irresponsible or politically biased manner. "I have never felt that Hassan was aligned with any political camp," said the premier. "I stress that the investigations must take their course until the truth is revealed."

Hassan had recently uncovered an alleged plot by Syria's Lebanese allies to spread discord and instability throughout Lebanon with a wave of bombings and assassinations. Arrested in that plot was former minister Michel Samaha, who prosecutors allege had smuggled explosives into Lebanon from Syria to support the bombing campaign.

The prime minister said it was obvious that Hassan's murder was tied to that case, as well as to other investigations into a series of political assassinations from 2005 to 2008.

The killing comes as Lebanon is struggling over how to respond to the civil war and humanitarian crisis in Syria. Syrian rebels have taken to using Lebanon as a safe haven and as a jumping-off point for military operations against Syrian troops posted along the border. A close ally of the Syrian regime, Hezbollah is often said to be conducting military operations inside Syria to help dampen the rebellion, in which more than 30,000 people have been killed since it began in the spring of 2011.

The assassination of Hassan prompted Lebanon's political opposition to place the blame for the killing squarely on Assad, who has had a poor relationship with Lebanon's Sunnis since Syria was accused of being behind the murder of the former prime minister.

Following the car bomb and ensuing violent protests that erupted around the country, the streets of the capital were almost deserted as people stayed indoors in case of violence or further assassinations. In one incident, Lebanese army troops opened fire on a car that ran a roadblock in the Beqa'a Valley, wounding two people.

Throughout Lebanon, security forces took steps to protect government buildings and maintain order. But in Sunni areas, security forces were scarce and a number of cars cruised the streets ordering Sunnis to call for the government's removal. Several Sunni militiamen could be seen carrying weapons on Friday night in a clear violation of Lebanese law.

Lebanon appears to be destabilising as more than 100,000 Syrians fleeing violence in their country have taken refuge within the country.