CAIRO - Egypt's Supreme Council of the Armed Forces decided Thursday to accept caretaker Prime Minister Ahmed Shafiq's resignation, and the caretaker government will remain until the formation of the new one under Essam Sharaf, said cabinet spokesman Magdi Radi.

In press statements, Radi said Sharaf is now holding consultations at the Supreme Council of the Armed Forces to form a new government, according to Egypt's MENA news agency.

The new government is expected to include some ministers who were in the caretaker government, MENA said.

Joy and relief overwhelmed the crowds gathering in Tahrir Square in downtown Cairo following the announcement of the Supreme Council of the Armed Forces to accept the resignation of Shafiq and assign Sharaf to form a new government.

With renewed confidence in the Armed Forces and longing for the stability of the country, the crowds chanted slogans like "The people and the Army are one hand."

The protesters also voiced their confidence in Sharaf and his ability to form a new government that could lead Egypt to development in the coming phase.

Sharaf served as the transportation minister from July 2004 to December 2005 in Ahmed Nazif government. He spent most of his life in Cairo University teaching engineering since 1991, and published more than 100 science theses in the field of road design and traffic management.

Shafiq was appointed by former President Hosni Mubarak before he stepped down on February 11 after 18-day protests against his 30- year rule.

The opposition parties had been calling for reshuffle of Shafiq 's government, in which the key defense and foreign ministers were appointed by Mubarak.