Kallas led her liberal Reform party to general election victories in 2019 and 2023 and has fronted the government since 2021.
She will remain as Estonia's caretaker prime minister until the next government is confirmed by early August, Estonia's public broadcaster ERR said.
The Reform party has tapped Climate Minister Kristen Michal to become the next prime minister, pending negotiations to reconfigure the cabinet with its coalition partners, the liberal Estonia 200 and the Social Democrats.
Kallas' party will elect a new leader on September 8.
Estonia under Kallas has been one of Europe's most vocal backers of Ukraine following the full-scale Russian invasion in February 2022.
Summing up Kallas' three-and-a-half years at the helm, President Alar Karis was told the Baltic News Service that "it has been a time full of crises, the milestones (such as) the coronavirus, the economic recession and the war in Europe, when Russia destroyed our previous security picture with its aggression in Ukraine".
Kallas' last main duty was to represent Estonia at a NATO summit in Washington last week.
Michal's nomination as prime minister will have to be approved by Karis and the 101-seat parliament where the coalition holds a comfortable majority. He has been serving as the minister for climate affairs since April last year.
The 49-year-old former economics and justice minister has been active in the Reform Party, Estonia's key political establishment, since the late 1990s.
with AP
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