Gen Halutz has been criticised for Israel failings in the conflict

Gen Halutz said he wanted to assume his "responsibilities" after a war which has been widely criticised for failing to crush the anti-Israel militia.

A military inquiry is now over, but the government's handling of the 34-day conflict is still being investigated.

The resignation is the latest in a series of setbacks for PM Ehud Olmert.

Hours before Gen Halutz made his announcement, the justice ministry ordered a criminal investigation into Mr Olmert's role in the privatisation of the country's second largest bank in 2005.

The BBC's Rachel Harvey in Jerusalem says now that the military chief has fallen on his sword, the spotlight is likely to shift back to the civilian leadership.

Under pressure

The military leadership has been criticised for poor planning, poor strategy and poor execution during the war.

Israeli views on the resignation of Lt Gen Dan Halutz

In pictures



In particular, Gen Halutz is accused of relying too heavily on air power and waiting too long to send in ground troops.

When they were sent in, many soldiers complained of being poorly equipped.

Gen Halutz said he had decided to step down now because military inquiries into the conduct of the war had been completed.

"With the echoes of battle having faded, I have decided to act on my responsibility," he is quoted as saying in his resignation letter.

State radio said Mr Olmert had tried in vain to convince him to stay until the results of all the investigations were known.

Not freed

Israel attacked the Lebanon-based Hezbollah after the group captured two Israeli soldiers in a cross-border raid last July.

WAR IN LEBANON Began on 12 July 2006 and lasted 34 days Israeli deaths: 116 soldiers and 43 civilians About 1,000 Lebanese killed, mostly civilians Extensive damage to infrastructure, thousands of homes destroyed

Conflict facts and figures

But it failed to free the soldiers or destroy Hezbollah before a ceasefire ended the fighting in August, with Hezbollah leader Sheikh Hassan Nasrallah claiming a strategic victory over Israel.

About 1,000 Lebanese were killed in the conflict, mostly civilians in Israel's vast bombardment of the county and land invasion in the south. Lebanon's infrastructure also suffered extensive damage.

The Israeli army lost 116 soldiers. Forty-three Israeli civilians were also killed by more than 4,000 Hezbollah rocket attacks.

A former air force head, Gen Halutz became chief of the armed forces in June 2005.

Several other senior army commanders have already resigned over the handling of the war.