The Iceland government has appointed former agriculture and fisheries minister, Sigurdur Ingi and pledged to hold early parliamentary elections before the end of this year.
The move on Wednesday came after former prime minister and ruling Progressive Party (PP) chairman Sigmundur Gunnlaugsson stepped down in the wake of the leaked Panama Papers, BBC reported on Thursday.
The leaks, from Panama law firm Mossack Fonseca, showed Gunnlaugsson owned an offshore firm with his wife.
However, Gunnlaugsson said he sold his shares to his wife and denies any wrongdoing. But he is accused of concealing millions of dollars' worth of family assets.
It was unclear whether the move would satisfy angry Icelanders, who staged a mass demonstration outside parliament for a third consecutive day on Wednesday.
"We want new elections," said Atli Magnusson, a behavioural analyst, standing with 3,000 other protesters. "They don't have our trust any more," The Guardian reported.
Johannsson is expected to meet Iceland's president, Olafur Ragnar Grímsson, later on Thursday to seek his approval to become the country's next prime minister.
