East Timor's embattled prime minister resigned Monday, setting off celebrations in the violence-scarred capital and raising hopes for an end to weeks of political turmoil and unrest. Prime Minister Mari Alkatiri, who is battling allegations that he formed a hit squad to silence opponents, has faced mounting calls to step down, including from the country's popular president. "I declare I am ready to resign from my position as prime minister," Alkatiri told reporters who gathered at his home in Dili. Many say Alkatiri's dismissal of 600 disgruntled soldiers in March was to blame for street battles and gang warfare that left at least 30 people dead and forced nearly 150,000 others to flee their homes. It was the worst violence since the nation voted for independence from Indonesia seven years ago. Alkatiri read a statement saying he wanted to share responsibility for the "crisis affecting our country" and to avoid the resignation of President Xanana Gusmao, who had threatened to step down if the prime minister did not. Gusmao, who led East Timor's armed resistance against 24 years of Indonesian role, enjoys nearly unanimous support in a country of 800,000 that is divided along political and sometimes ethnic lines. As news of Alkatiri's decision spread, thousands of demonstrators drove through the main streets of Dili, banging drums and cans. At the waterfront site where they have rallied since last Tuesday, young men danced in the street. It was not immediately clear who would succeed Alkatiri or whether his decision required the approval of the ruling Fretilin party, which said over the weekend that it did not want him to resign. That prompted the resignation Sunday of Nobel prize-winning Foreign Minister Jose Ramos-Horta as well as the transport minister, raising concerns the government could collapse. Ramos-Horta, who has volunteered to lead an interim government until elections next year, was not immediately available for comment. Violence in Dili, including gunbattles between rival security factions and clashes between machete-wielding youths, eased last month with the arrival of a 2,700-member Australian-led peacekeeping force. Hundreds of houses were burned to the ground and government warehouses were looted. Australia welcomed Alkatiri's resignation, with Deputy Prime Minister Mark Vaile calling it a "positive move." Though Alkatiri said he knew nothing about the alleged hit squads, a close ally, the former interior minister, is facing charges for allegedly arming civilian militias at his request. Alkatiri's departure will raise hopes for the nearly 150,000 people who remain in tent camps in and around Dili, a normally sleepy seaside city dotted with whitewashed churches, a legacy of four centuries of Portuguese colonial rule.