Sebastien Lecornu's resignation after only two weeks in office was unexpected and unprecedented, and marked another major deepening of France's political crisis.
The far-right National Rally immediately urged President Emmanuel Macron to call a snap parliamentary election.
After weeks of consultations with political parties across the board, Lecornu, a close ally of Macron, had appointed his ministers on Sunday and they had been set to hold their first meeting on Monday afternoon.
But the new cabinet line-up had angered opponents and allies alike, who either found it too right wing or not sufficiently so, raising questions on how long it could last, at a time when France is already mired deep in political crisis, with no group holding a majority in a fragmented parliament.
Lecornu handed his resignation to Macron on Monday morning.
"Mr Sebastien Lecornu has submitted the resignation of his government to the president of the republic, who has accepted it," the Elysee's media office said.
French politics has become increasingly unstable since Macron's re-election in 2022 for want of any party or grouping holding a parliamentary majority.
Macron's decision to call a snap parliamentary election in 2024 deepened the crisis by producing an even more fragmented parliament.
Lecornu, who was only appointed in September, was Macron's fifth prime minister in two years.
"There can be no return to stability without a return to the polls and the dissolution of the National Assembly," National Rally leader Jordan Bardella said after Lecornu resigned.
The announcement drove French stocks and the euro sharply lower.
Paris's CAC 40 dropped 1.5 per cent, making it the worst-performing index in Europe, while the euro slid 0.7 per cent on the day to $US1.1665.
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