Prime Minister Alexis Tsipras has announced he is resigning and has called an early election.
Mr Tsipras, who was only elected in January, said he had a moral duty to go to the polls now a third bailout had been secured with European creditors.
The election date is yet to be set but earlier reports suggested 20 September.
Mr Tsipras will lead his party into the polls, but he has faced a rebellion by some members angry at the bailout’s austerity measures.
He had to agree to painful state sector cuts, including far-reaching pension reforms, in exchange for the bailout – and keeping Greece in the eurozone.
Greece received the first €13bn ($14.5bn) tranche of the bailout on Thursday after it was approved by relevant European parliaments.
It allowed Greece to repay a €3.2bn debt to the European Central Bank and avoid a messy default.
The overall bailout package is worth about €86bn over three years.
Alexis Tsipras made the announcement in a televised state address today.
“The political mandate of the 25 January elections has exhausted its limits and now the Greek people have to have their say,” he said.
Mr Tsipras said he would seek the Greek people’s approval to continue his government’s programme.
Angela Merkel, the German Chancellor, is relaxing in Brazil this evening with the country’s president Dilma Rousseff as uncertainty hangs over Greece.
Speaking to reporters, Ms Rousseff said Ms Merkel has told her that “Tsipras stepping down is part of the solution, not part of the crisis”.
