REYKJAVIK (AFP) - Iceland's prime minister resigned on Sunday (Oct 30) after a snap vote in which no party won a majority, paving the way for intense negotiations over the next government.

The announcement by Sigurdur Ingi Johannsson came after his centrist Progressive Party suffered a drubbing in Saturday's election, winning just eight seats in the 63-member parliament from 19 in the outgoing assembly.

He told a news conference that the move was in line with the constitution, which provides for him to remain in office until a new government is established.

President Gudni Johannesson is set to task Finance Minister Bjarni Benediktsson, whose conservative Independence Party won 21 seats on Saturday, the highest number of any party, with trying to form a new government.

The Progress and Independence parties have been governing in a coalition but a snap election was called after Johannson's predecessor Sigmundur David Gunnlaugsson was forced to resign over the Panama Papers offshore tax havens scandal in April.

The radical Pirate Party and three centre-left allies won 27 seats on a wave of popular anger against establishment parties but fell short of a majority.