Nearly 400 people have been killed in protests since the start of October.
UN Secretary General Antonio Guterres said he was “deeply concerned over reports of the continued use of live ammunition against demonstrators” and called for “maximum restraint”.
Why is Abdul Mahdi resigning?
The statement said he would present his resignation to parliament so lawmakers could select a new government.
It came after Grand Ayatollah Ali al-Sistani called for a new government.
“In response to this call, and in order to facilitate it as quickly as possible, I will present to parliament a demand [to accept] my resignation from the leadership of the current government,” the statement signed by Mr Abdul Mahdi said.
The statement did not say when his resignation would take place. On Sunday parliament will hold an emergency session to discuss the crisis.
Earlier on Friday Ayatollah Sistani said the government appeared to have been “unable to deal with the events of the past two months”.
“Parliament, from which the current government emerged, must reconsider its choices and do what’s in the interest of Iraq,” he said in remarks delivered by his representative during a televised sermon in the city of Karbala.
Mr Abdul Mahdi had earlier ordered an investigation into Thursday’s violence in Dhi Qar and Najaf provinces.
What’s the background?
Mr Abdul Mahdi took office just over a year ago, promising reforms that have not materialised.
The demonstrations escalated and spread across the country after security personnel responded with deadly force.
At the end of October Mr Abdul Mahdi offered to resign if parties could agree a replacement.
What’s the latest?
On Friday large crowds attended funerals for those killed in the city of Najaf and protesters rallied in the city of Nasiriya, where most of the deaths on Thursday occurred.
Three people died in clashes between protesters and security forces in Nasiriya on Friday, Reuters news agency quoted medics as saying.
There were also reports that two protesters had been shot dead in Baghdad.
The deputy governor of Najaf has resigned, following the governor who resigned on Thursday.
What happened on Thursday?
- At least 25 people died when security forces opened fire to clear bridges there. Protesters responded by torching a police station
- Ten protesters died in the city of Najaf after security forces cracked down following the burning of Iran’s consulate, and a curfew is in place
- Another four protesters died in Baghdad as protesters tried to cross a bridge towards the so-called Green Zone that hosts the country’s parliament
Why did protesters target an Iranian consulate?
Protesters accuse Iran of complicity in what they see as Iraq’s governance failure and corruption.
They chanted “Iran out of Iraq” as Iran’s mission in Najaf burned.¿