Italian President Giorgio Napolitano is to hold crisis talks with political leaders following the resignation of Prime Minister Romano Prodi, BBC reported.
Prodi stepped down after being defeated in a vote of confidence in the upper house of parliament, the Senate.
The president is said to favour an interim government to push through much-needed electoral reforms.
But opposition leader Silvio Berlusconi is calling for snap elections, which would favour his centre-right party.
The crisis was sparked by the withdrawal on Monday of the centrist Udeur party - with its three seats - from Prodi's ruling coalition, costing the prime minister his Senate advantage of two.
The party pulled out, citing a lack of support for its leader, the former Justice Minister Clemente Mastella, who resigned after being named in a corruption probe. He maintains that he is innocent.
The embattled 68-year-old premier won Wednesday's Chamber of Deputies vote by 326 votes to 275, but fell four votes short of the 160 the coalition needed to survive in the Senate vote.