Adil Abdul Mahdi says he will step down in response to a call for a change of leadership by the country's top cleric Ayatollah Ali al Sistani, even as more protesters are shot dead in southern Nasiriyah city.
The anti-Iranian sentiment that has dominated weeks of protests in Iraq might have been a turning point.
At least 350 people have died since October 1, when protesters took to the streets to decry corruption.
Tehran "demanded decisive, effective and responsible action... against destructive agents and aggressors" after anti-government protesters burned down an Iranian consulate building in Najaf in southern Iraq.
Six people were killed in three blasts in Iraqi capital Baghdad, medics say, even as Iraqi security forces shot dead two protesters in Baghdad and central Karbala cities.
The most recent protests differ radically in their demands and the harsh government response has raised the stak.
Baghdad has become the centre of a tug of war between Washington and Tehran, but it's trying its best to maintain a balance between the two rivals while pursuing its own interests.
Sistani has been one of the most influential religious leaders in Iraqi politics since the US invasion of Iraq. While his word is not law - it cannot be ignored.
Part II: The Return - this is the second in a series of articles that looks at how the Iranian Revolution came to be in 1979, and where it has led Iran over the course of four decades.
Opposition to Bahrain's monarchy has set up shop in Iraq and criticism within Iraq of Bahrain's crackdown on dissidents hasn't gone down well in Manama. The perceived interference in Bahraini affairs could set Iraq on a collision course with the GCC.
Iraqi Prime Minister Haider al Abadi and cleric Moqtada al Sadr said their alliance "doesn't not mean the door is closed for the remaining blocs" to join them.
The attacks came after French President Francois Hollande arrived in Baghdad to meet the French troops who are assisting Iraqi forces in their fight against Daesh.
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