Jammeh's decision to leave appears to end a protracted political crisis in this former British colony, allowing newly-elected president Adama Barrow to take over.
Announced in the early hours of Saturday morning, Jammeh's decision to leave appears to end a protracted political crisis in this former British colony, allowing newly-elected president Adama Barrow to take over.
The announcement came after flurry of last-minute diplomacy by the presidents of Guinea and Mauritania who jetted into the capital Banjul on Friday to persuade the recalcitrant leader to stand down.
Several sources said he was likely to leave on Saturday, but so far there has been no clear agreement on where he would go.
And his actions will be carefully monitored as he has previously agreed to step down after recognising Barrow as winner of the December 1 elections -- then completely reversed his position.
"I have decided today in good conscience to relinquish the mantle of leadership of this great nation with infinite gratitude to all Gambians," Jammeh said on state television in the early hours of Saturday.
"My decision today was not dictated by anything else than the supreme interest of you, the Gambian people and our dear country," he said following hours of talks with Guinea's Alpha Conde and Mauritania's Mohamed Ould Abdel Aziz.
At Friday's talks, backed by the 15-nation Economic Community of West African States (ECOWAS), an agreement was reached in principle for Jammeh to leave, but by Saturday morning, it had still not been signed.
The agreement "foresees the departure of Yahya Jammeh from The Gambia for an African country with guarantees for himself, his family and his relatives," Abdel Aziz said on return to Nouakchott in remarks quoted by the official AMI news agency.
After a calm night in Banjul, many only heard the news on waking, and greeted his declaration with a cautious optimism, aware of the strongman's mercurial nature.
"God has heard our prayers!" said Sheikh Sham, a 34-year-old metalworker from the suburb of Kanifing.
"This is long overdue. Our suffering has ended and our children will go back to school."
Speaking to AFP on Saturday morning, a Mauritanian diplomatic source close to the talks said Jammeh would likely leave during the day.
"He will most likely go to Equatorial Guinea," she said, saying Barrow was expected to return to the country during the evening.
Other sources, however, suggested Jammeh would head to the Guinean capital Conakry on Saturday.
Jammeh's refusal to leave had triggered a major political crisis, with the international community putting huge pressure on him to step down and troops from five African nations gathering on The Gambia's borders.
The crisis also sparked panic on the ground, sending thousands of foreign visitors fleeing in what threatened to deal a potentially devastating economic blow to a country which earns up to 20 percent of its income from tourism.
It had also triggered an exodus among locals, with UN figures showing around 45,000 Gambians had so far left, more than three quarters of them children, mostly accompanied by women.
Although the crisis appeared to be abating, regional troops remained in place to see whether Jammeh would keep his word, and it was thought Conde would stay into Saturday to iron out remaining disagreements.
"Jammeh has accepted he will leave power. The discussions revolve around where he will live in exile and the conditions around that," a Mauritanian source close to the delegation in Banjul told AFP.
A highly-placed Guinean source said the country of exile had to be far enough away to stop Jammeh interfering in his country's affairs.
Barrow, who has been sheltering in neighbouring Senegal, was sworn in as president at The Gambia's embassy in Dakar on Thursday. He will take over from Jammeh as soon as his safety can be guaranteed.
A Banjul-based diplomatic source warned that 51-year-old Jammeh could "quite easily" change his mind.
Jammeh now has a three-day grace period with foreign troops on standby until he definitively quits the country, the source said.
In a further positive development, army chief Ousman Badjie, a former Jammeh loyalist, had on Friday pledged allegiance to Barrow along with other top defence and security chiefs, a government source said.
With white flags reportedly flying from Gambian army posts in the countryside, sources suggested there was a gradual acceptance of Barrow, even among units known for loyalty to Jammeh.
A diplomatic source said a faction within the elite Republican Guards, who assure the president's protection, had "switched sides" following internal talks at barracks near Banjul.