Azarov and his Cabinet will continue in their roles until a new government is formed, a notice on the presidential website said.
Yanukovych's announcement comes only hours after Azarov submitted his resignation and as the national parliament meets in a special session aimed at ending the crisis.
In a first step, lawmakers voted overwhelmingly to repeal sweeping anti-protest laws whose passage this month angered anti-government demonstrators.
A protester stands on top of barricades in Ukraine's capital of Kiev on Tuesday, January 28. Long-running demonstrations escalated into violent confrontations this month, with police and protesters fighting in Kiev's icy streets.
Protesters sit behind a barricade in Kiev on January 28. Protesters first poured into the streets of the Ukrainian capital in November, angered by their government's move away from the European Union in favor of closer ties with Russia. The escalation came after anti-protest legislation was passed by parliament on January 16.
Protesters march in Kiev on Monday, January 27. Activists say they want wide-ranging constitutional reform and a shake-up of the Ukrainian political system.
Police block a street in the Ukraine capital on January 27.
A couple try to keep warm near a fire at a barricade in Kiev on January 27.
Riot police block a Kiev street from protesters on January 27.
Protesters stand guard inside the Ukraine Justice Ministry in Kiev on January 27. Demonstrators later left the building because they didn't want to create any difficulties in negotiations between the government and opposition, a protest leader said. Protesters repositioned themselves outside and blocked access to the building, the leader said.
Orthodox priests lead the funeral service for slain protester Mikhail Zhiznevsky in Kiev on Sunday, January 26.
Ukrainian riot police officers stand in line during anti-government protests in Kiev on Saturday, January 25.
An Orthodox priest prays during protests on January 25.
Some 10,000 Ukrainians take part in the funeral ceremony of dead protester Yuri Verbytsky in the western city of Lviv on Friday, January 24. Verbytsky was reportedly abducted on Tuesday and was found dead in a forest near Kiev on Thursday.
A line of Ukrainian riot police block a road on January 24.
A protestor puts on a gas mask near Dynamo Stadium in Kiev on January 24.
Ukrainian Oksana Tikhomirova cries as she urges riot police to stop the violence outside a government district in central Kiev on January 24.
Molotov cocktails sit in a basket ready to be used by protesters in Kiev on January 24.
Riot police stand guard near Dynamo Stadium on January 24.
A protester passes past graffiti that reads "Government for People" in the Ministry of Agricultural Policy building in Kiev on January 24.
A man walks past the wreckage of a car on January 24.
Ukrainian protesters use a huge catapult to throw stones at riot police as tires burn in Kiev on Thursday, January 23.
Riot police officers gather in Kiev on January 23.
Opposition leader Vitali Klitschko, center, addresses protesters near the burning barricades between police and protesters in central Kiev on January 23.
Riot police stand guard near a burnt-out bus covered in icicles in Kiev on January 23.
A protester walks past burning tires in Kiev on January 23.
A protester shoots fireworks at police during clashes in Kiev on January 23.
A protester carries tires toward a fire on January 23.
Riot police officers line up in Kiev during clashes on Wednesday, January 22.
A protester throws a Molotov cocktail on January 22.
Protesters shoot from behind a shield among burning automobile tires in Kiev on January 22.
Riot police officers gather as they clash with protesters in the center of Kiev on January 22.
A protester throws a Molotov cocktail during clashes with police in central Kiev.
Ukrainian protesters during a mass action of opposition on Grushevsky Street.
A protester throws a stone in front of a plume of fire and smoke during clashes with police in central Kiev.
Flames leap off a protester during clashes with police on January 22.
A police officer aims his shotgun during clashes with protesters.
Paramedics put a wounded man on a stretcher and into a medical vehicle.
Ukrainian police storm protesters' barricades in Kiev amid violent clashes on January 22.
A European integration supporter at Independence Square in central Kiev.
Protesters in front of burning tires on Grushevsky Street.
A medic treats an injured protester's leg during violent clashes between demonstrators and police.
A Ukrainian man stands in front of riot police on January 22.
Protesters clash with police in Kiev as snow falls on January 22.
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The special parliamentary session is now looking at legislation that might provide amnesty for more than 200 people arrested since the demonstrations began in late November.
But activists on the street have said that while they are pleased by the concessions, their fundamental grievances have yet to be addressed.
They want to see wide-ranging constitutional reform and a shake-up of the Ukrainian political system.
The controversial anti-protest laws were rammed through parliament on January 16 by a show of hands by members of Yanukovych's Party of Regions.
Anger about the legislation escalated long-running anti-government protests into violent confrontations, with police and protesters fighting pitched battles in the icy streets of Ukraine's capital, Kiev.
As the crisis has deepened, Yanukovych's government has come under increasing pressure both internally and from Western governments concerned about an apparent bid to limit people's democratic rights.
Vitali Klitschko, leader of the opposition Ukrainian Democratic Alliance for Reforms party, or UDAR, told reporters at parliament that the repeal of the anti-protest laws was a small but very important step.
Much remains to be done, he said, according to his party's website. "Today, we still have to consider a very important issue on the amnesty and release of all detained demonstrators," he said.
"It is also crucial to address the question of the constitutional reform, which will divide powers between a President, a Prime Minister and the Parliament."
In a statement posted on the government's website, Azarov said that by quitting he intended to "create more opportunities for social and political compromise for a peaceful settlement of the conflict."
That conflict "is a threat to the entire Ukrainian society and every citizen," he said, adding that the government was doing all it could to prevent bloodshed.
It will probably take more than Azarov's departure to satisfy the demands of hardy protesters who, despite the bitter cold and threat of violence, have massed in and around central Kiev's Independence Square, or Maidan, to demand Yanukovych's ouster and new elections.
In recent days, protests have also spread to other cities around the country.
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Azarov's resignation may have been a case of jumping before he was pushed.
He was widely expected to face a vote of no confidence in his government at the special parliamentary session, and his post had already been offered to an opposition leader.
Arseniy Yatsenyuk, who heads the Fatherland Party, refused Yanukovych's offer to be prime minister, but Azarov's position was made almost untenable.
Speaking in parliament Tuesday, Yatsenyuk urged the President to sign the law repealing the anti-protest legislation as soon as possible, according to the official Ukrinform news agency.
"I'm asking Viktor Yanukovych to immediately sign a law for which the parliament has just voted," he said. "We have finally closed the shameful practice of voting by a show of hands and abolished those laws against which the whole of Ukraine rebelled."
Fatherland is also the party of former Prime Minister Yulia Tymoshenko, who has been imprisoned since 2010 on charges the United States and Europe have called politically motivated. In a statement Monday evening, she called on the opposition to remain firm.
State of emergency threatened
Another round of talks was held Monday between the government and the opposition as they sought a resolution to the crisis.
Justice Minister Olena Lukash said late Monday that the anti-protest laws passed on January 16 would be repealed and the protesters who occupied her ministry would receive amnesty -- as long as they cleared out of "all seized premises and roads."
Anti-government demonstrators had seized the Justice Ministry building Sunday night but cleared out Monday after Lukash threatened to impose a state of emergency.
Opposition spokeswoman Lesya Orobets warned that such a step could lead to the use of military units to suppress protests.
The European Union's foreign policy chief, Catherine Ashton, who is expected to arrive late Tuesday in Kiev in a bid to defuse the crisis, also urged Ukraine's leaders not to impose a state of emergency.
The move "would trigger a further downward spiral for Ukraine, which would benefit no one," she said in a written statement late Monday.
"What is urgently needed is a genuine dialogue to build a new consensus on the way forward," Ashton said. "I hope that the Ukrainian parliament will set a clear path during tomorrow's session towards a political solution."
Ashton will travel to Kiev after attending a long-planned "Russia summit" in Brussels, Belgium, with Russian President Vladimir Putin, her spokesman, Michael Mann, said Tuesday.
European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy are also taking part in the summit. It's expected to last about 2½ hours, shorter than originally planned, Mann said.
There have been tensions between Russia and the European Union over developments in Ukraine, with each side accusing the other of interference.
Ukraine, a former Soviet republic, is home to 45 million people. The clashes over the past 10 days are an escalation of weeks of largely peaceful public protests prompted by Yanukovych's decision in November to spurn a planned trade deal with the European Union and turn toward Russia instead.
The mass protests have galvanized the opposition parties challenging Yanukovych and his government.
U.S. Vice President Joe Biden called Yanukovych on Monday night to reiterate American support for "a peaceful, political solution to the crisis," the White House said.
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