President Giorgio Napolitano asked Romano Prodi on Saturday to stay on as premier and immediately verify his centre-left government's majority in parliament.
After meeting with Prodi at the presidential palace, Napolitano said he had rejected the premier's resignation and instead asked him to test his majority via confidence votes in the House and Senate.
Napolitano said there was "no concrete alternative... this was the only solution despite the contrary opinion of opposition groups".
The premier quit on Wednesday after losing an important vote in the Senate on the government's foreign policy.
Prodi told reporters after his meeting with Napolitano: "I will present myself in parliament for the confidence vote as soon as possible with the renewed impetus of a coalition which is united and determined to help the country in this difficult stage and boost its economic recovery".
The 67-year-old former European Commission chief also thanked Napolitano for his support.
Napolitano said the confidence votes would be held "very quickly" to "immediately restabilise normal government and parliamentary activity".
"My concern and hope is that the country can be governed in a stable and credible way, with constructive relations between the majority and the opposition," the head of state, a former Communist, added.
Napolitano spent two days in talks with parliamentary speakers, party leaders and whips and former heads of state to decide how to resolve the crisis.
Opposition chief and former premier Silvio Berlusconi had told the president on Friday that his coalition was against Prodi remaining in power.
Napolitano admitted that the crisis had been "particularly complex and difficult" but stressed that fresh elections were not required.
The 86-year-old president said that only one opposition party, the devolutionist Northern League, had demanded snap elections but that this option had been discarded because of the agreed need to reform Italy's electoral system first.
The previous, Berlusconi-led government pushed through a controversial electoral reform only four months before the last elections in April 2006 which returned Italy to full proportional representation (PR).
The reform has been criticised as complex and muddled and has been blamed by parties on both sides for creating political instability.
FOCUS ON THE SENATE.
Political sources said Napolitano's key concern was whether Prodi could now guarantee a stable majority in the Senate, where the nine-party governing coalition holds only one more seat than the opposition.
They said the president was willing to give Prodi another chance to consolidate his grip on power but had warned him that he would call elections if the government was defeated another time in the Senate.
Prodi's majority in the upper chamber was boosted on Friday by the announcement of an opposition moderate that he would support the nine-month-old government.
Senator Marco Follini, a Catholic centrist who has broken ranks with Berlusconi, said he would back Prodi in a confidence vote.
The premier can also count on the support of at least four of the upper chamber's seven life senators.
Prodi has angered hard-leftist and pacifist allies by refusing to withdraw Italian peacekeeping troops from Afghanistan and approving the expansion of a US military base in the northern city of Vicenza.
Wednesday's vote defeat was mainly caused by the defection of two hard-left senators.
There was no constitutional requirement for Prodi to resign since the Senate ballot was not a confidence vote. But Foreign Minister Masssimo D'Alema upped the stakes by saying ahead of the vote that the government would quit if it lost.
Prodi has now pinned his Communist-to-Catholic allies to a "non-negotiabale" 12-point programme.
A key clause in the programme, approved by all nine parties in the coalition during a Thursday night summit, is that the premier has the final word in the event of a row.
"To ensure full efficacy, the premier has the authority to express the government's position in a united manner in the case of divisions," the 12th article said.
The document also said a government spokesman would be appointed in a bid to improve the administration's communication skills and bring ministers into line.
The first point addressed foreign policy, confirming commitments "deriving from Italy's membership of the European Union and NATO" and the mission in Afghanistan.
The document contains no mention of plans to grant rights to cohabiting heterosexual and same-sex couples, another divisive issue which has upset centrist Catholics in his coalition and triggered fierce protests from the Church.
D'Alema on Saturday called on all members of the governing coalition to act with greater responsibility in future.
"We must defend this government, political stability and the country, as well as the credibility of the Italian Left," he said.
"It would be totally irresponsible to plunge the country into new elections," he said.
