"I will not run for president," said Mr Gusmao, who had been widely expected to assume the position.

"I believe that if I could do something for this country and these people it was in a different stage of the process, the liberation struggle," he said.

East Timor's temporary UN administrator, Sergio Vieira de Mello, said he had accepted Mr Gusmao's resignation on Wednesday night from the National Council, East Timor's UN-controlled interim legislature, but hoped the former guerilla leader would change his mind and run for president.

"I do hope he will stand for elections," Mr de Mello said. "I believe he is key to stability in East Timor during the transitional phase and particularly after independence."

East Timor has been under UN administration since 1999, when an overwhelming majority of its people voted for independence from Indonesia, which occupied the region since 1975.

A campaign of killings and destruction by pro-Jakarta militias that gripped the territory after the ballot was brought to a halt by the arrival of an Australian-led peacekeeping force in September 1999.

In his resignation letter to Mr de Mello late on Wednesday, Mr Gusmao said the National Council - which consists of 36 members appointed by the United Nations - no longer reflected the views of the East Timorese people. The committee is a consultative body working alongside the UN administration.

"He feels he was unfairly challenged by some members of the National Council, and I agree with him," Mr de Mello said.

Mr Gusmao quit after an acrimonious debate in the legislature about the new constitution. He appears to have been angered that his own party blocked a proposal - which he favoured - that all of East Timor's 600,000 people be canvassed for their views on the new national charter.

Elections are due to be held in August for an 88-seat constituent assembly that will replace the National Council and draw up a new constitution. This would be followed by a presidential election and the declaration of full independence, probably in the first half of next year.

Mr Gusmao led the East Timorese freedom fighters in their long battle against Indonesian occupation. He was captured by government troops in 1992 and sentenced to life in prison. But he was released at the time of the 1999 plebiscite.

Despite his resignation, many people in the territory believe the mercurial 54-year-old leader will succumb to popular pressure and compete in and win the presidential election.

"He is our hero. We still need him - not only the National Council, but all people in East Timor need him," said National Council member Clementino dos Reis Amaral.

Nobel laureate Jose Ramos Horta, who is also a council member and the territory's unofficial foreign minister, said he was not surprised by Mr Gusmao's move, but said it was likely he would change his mind.

"I am still completely hopeful he will in the end accept," he said. "He cannot just walk away."

Mr Gusmao's Australian-born wife, Kirsty, said in Geneva that his resignation showed he did not wish to dominate the political scene.

This is not the first time Mr Gusmao has resigned after disagreements with political rivals.

On August 27, he announced his resignation from the territory's main political coalition, the National Council of Timorese Resistance. But he changed his mind on the same day, saying he had underestimated the strength of his popular support.