Israel's Prime Minister Ehud Olmert gives a speech during a graduation ceremony of the National Security College in Jerusalem July, 2008.(Xinhua/Reuters Photo)

Olmert's brief address from his official Jerusalem residence included harsh criticism of the police investigations. He said he was choosing the public good over personal justice. Although he has consistently denied wrongdoing, he had pledged to resign if indicted.

"I was forced to defend myself against relentless attacks from self-appointed 'fighters for justice' who sought to depose me from my position, when the ends sanctified all the means," Olmert said, appearing angry and reading from a text.

He did not answer questions from reporters gathered in his courtyard.

His decision not to run in the Kadima primary sets in motion a process to choose a new prime minister. Main candidates in his party are Foreign Minister Tzipi Livni and Transport Minister Shaul Mofaz, a former defense minister and military chief of staff. Polls show Livni with an advantage in the primary. If she were to replace Olmert, she would become the second female prime minister in Israeli history, after Golda Meir.

If Olmert's successor as party leader can form a coalition, Israel could have a new government in October. If not, an election campaign could extend into 2009. Olmert would remain in office until a new premier is chosen, heading a caretaker government after he submits his resignation to President Shimon Peres.

Israel's labyrinthine political system is weighted against a quick internal Kadima resolution to the crisis -- with hard-line ex-premier Benjamin Netanyahu of Likud waiting to take advantage. Netanyahu opposes most concessions to the Palestinians and Syrians suggested by Olmert.

Olmert's Kadima Party has only 29 seats in the 120-member parliament, and his successor must patch together a coalition with a majority. Olmert's main partner, Labor, is headed by another ex-premier, Ehud Barak, who would like his old job back and may be more comfortable forcing an election than playing second fiddle to Livni.

The ultra-Orthodox Shas, another member of Olmert's coalition, traditionally exacts a huge price in budgets for its constituency, as well as pledges of legislation, before it joins a government. Its participation in a new Kadima team is not guaranteed.