The large Indian Ocean island, famed for its wildlife and eyed by foreign firms for its minerals, has struggled to revive its economy since a coup in 2009 that drove away donors and plunged the nation into prolonged crisis.
A peaceful 2013 election has improved prospects and brought back aid flows, but the rebuilding progress has been slow.
(READ MORE: Madagascar showing recovery signs: IMF)
Prime Minister Roger Kolo, who resigned with his government late on Monday, pointed to growing public discontent in comments to journalists on Tuesday although he did not get specific.
"We must take account of the interests of the 20 million Malagasy," he said after President Hery Rajaonarimampianina accepted his resignation. "Some things have been successful, other have not been."
Deputy Parliament Speaker Freddie Mahazoasy said 118 members of parliament representing all parties in the assembly had drawn up a list of 14 potential names for premier, including former president Marc Ravalomanana, who was deposed in the 2009 coup.
President Rajaonarimampianina, backed in the 2013 election by former president Andry Rajoelina who came to power in the coup, has recently distanced himself from his one-time ally and has sought to build an alliance with Ravalomanana, analysts say.
Ravalomanana returned to Madagascar from exile in October and was put under house arrest. Late last month his detention was shifted from outside the capital to his Antananarivo home.
(READ MORE: IMF approves 47.1 million dollar RCF for Madagascar)
"This resignation (of the government) has become necessary because of popular discontent. People blame the president's unfulfilled promises on social issues, such as the blackouts," said analyst Harotsilavo Rakotoson.
As well as complaining about regular power cuts, many people also felt the government did not do enough to prevent a rare outbreak of the plague. The World Health Organisation (WHO) said in November that 40 people out of 119 confirmed cases had died of plague since late August.
Rakotoson said a new government could inject impetus in discussions with donors and might be an opportunity for the president to build on his growing alliance with Ravalomanana.