Italian Premier Silvio Berlusconi resigned on Saturday after parliament's lower chamber passed European-demanded reforms, ending a 17-year political era and setting in motion a transition aimed at bringing the country back from the brink of economic crisis.

Italian President Giorgio Napolitano's chief of staff Donato Marra announced that Berlusconi had tendered his resignation to Napolitano after the two men met at Quirinale presidential palace in Rome.

"After the approval of the Stability Law and of the state budget, Berlusconi tendered his resignation from his government," Marra announced.

Thousands of Italians poured into central Rome to rejoice at the end of Berlusconi's scandal-marred reign.

Hecklers shouted "Buffoon, Buffoon!" as Berlusconi's motorcade entered and then left the presidential palace, where he tendered his resignation to Napolitano, the palace said in a statement.

Respected former European commissioner Mario Monti remained the top choice to try to steer the country out of its debt woes as the head of a transitional government, but Berlusconi's allies remained split over whether to support him.

Their opposition wasn't expected to scuttle Napolitano's plans to ask Monti to try to form an interim government as early as Sunday, but it could make Monti's job more difficult.

Napolitano will hold consultations on Sunday morning with all Italy's political parties.

The back-to-back, 10-minute meetings he has scheduled indicated the talks wouldn't drag on and that Monti would be nominated by the end of the day.

Late on Saturday, Berlusconi's party said it would support Monti, albeit with conditions.

Berlusconi's resignation was set in motion after the Chamber of Deputies, with a vote Saturday of 380-26 with two abstentions, approved economic reforms which include increasing the retirement age starting in 2026 but do nothing to open up Italy's inflexible labour market.

The Senate approved it a day earlier and Napolitano signed the legislation on Saturday afternoon, paving the way for Berlusconi to leave office as he promised to do after losing his parliamentary majority earlier in the week.

He chaired his final Cabinet meeting on Saturday evening and thanked his ministers.

Berlusconi stood as lawmakers applauded him in the parliament chamber immediately after the vote.

But outside his office and in front of government palazzos across town, hundreds of curiosity-seekers massing to witness the final hours of his government heckled him and his ministers.

"Shame!" and "Buffoon" the crowds yelled, as they marched through downtown Rome in an indication that for many Italians, as well as financial markets, the time had come for Berlusconi to go.

Berlusconi supporters were also out in force, but they were outnumbered.