President Abdelaziz Bouteflika originally declared his candidacy for a fifth term, then withdrew and postponed the election in response to massive protests. But he stopped short of stepping down immediately.
Embattled Algerian President Abdelaziz Bouteflika says he will step down before his fourth term ends on April 28.
In a short statement issued on Monday, the president's office said Bouteflika would take "important steps to ensure the continuity of the functioning of state institutions" during a transition period following his departure from the post he has held since 1999.
Millions of Algerians have been holding weekly protests nationwide to demand that Bouteflika leave office along with his cadre of loyalists.
The 82-year-old president has been in public rarely since he suffered a stroke in 2013.
He originally declared his candidacy for a fifth term, then withdrew and postponed the election in response to the massive protests. But he stopped short of stepping down immediately, to wait for a national conference on political change.
That further enraged protesters, prompting Salah to step in by proposing last week to ask the constitutional council to see whether he is still fit for office.
TRT World's Philip Owira reports.
Late on Sunday, hundreds took to the streets in the capital, Algiers, to demand Bouteflika go, according to residents and pictures posted on social media.
The statement from the president's office came hours after Bouteflika named a caretaker Cabinet.
Political sources said that might be a signal that Bouteflika could resign, as a caretaker president cannot name Cabinets.
Incumbent Prime Minister Noureddine Bedoui will head the administration, state news agency APS said, listing 27 ministers.
Central bank Governor Mohamed Loukal was named as finance minister, while the former head of the state power and gas utility Mohamed Arkab will be energy minister, APS said.
Sabri Boukadoum, a former envoy to the United Nations, becomes foreign minister and replaces Ramtane Lamamra, who spent less than a month in the role.
Salah kept his position as deputy defence minister in the reshuffle, according to state media. Bouteflika kept his title as defence minister.
Bouteflika also named the communications minister, Hassane Rabhi, as government spokesman, a rarely filled post in what critics say has been a secretive administration.
TRT World spoke to Lamia Achouche in Algiers for more.
Demonstrators have rejected military intervention in civilian matters and want to dismantle the entire ruling elite, which includes veterans from the war of independence against France, army officers, the ruling party and business tycoons.
Tens of thousands have taken to the streets of Algiers for more than a month, complaining of corruption, nepotism and economic mismanagement they say has tarnished Bouteflika's rule.
But two opposition leaders have supported the army initiative.
"The merit of this approach is that it responds to a pressing popular demand," Ali Benflis, a former head of the ruling FLN party, said in a party statement. "We are facing a political, constitutional and institutional crisis."
Abderazak Makri, head of an religious party, said he was against anything that threatened the stability and unity of the country or undermined the military.
Several close allies, including some members of the ruling FLN and union leaders, have abandoned Bouteflika.
The secretary-general of the United Nations said on Sunday he welcomed efforts towards a peaceful and democratic transition in Algeria.
Addressing an Arab League summit in Tunis, UN Secretary-General Antonio Guterres said any steps should be taken in a way "that addresses the concerns of the Algerian people in a timely way."