Conte handed his resignation to President Sergio Mattarella, according to a presidential palace statement.
The President will begin consultations with the leaders of the country’s main political parties on Wednesday afternoon, the statement said.
If Conte, who does not belong to a party, has enough support, Mattarella could ask him to form a new coalition.
Another option to break the impasse would be to call snap elections, two years early.
“The President of the Republic is reserving his decision and has asked the government to stay in office for the management of ordinary affairs,” the statement said.
If Conte receives the mandate, he would likely look for a broader coalition and to add five more senators to the fold.
Without a Senate majority, Conte would struggle to pass effective legislation at a time of crisis for the European nation, which has suffered years of political instability in addition to new economic challenges amid the pandemic.
Italy has been through several political crises since the end of World War II and has held many snap elections before sitting governments have finished their electoral terms. Conte is the country’s 66th leader in 75 years.
His coalition, which was formed in 2019, is led by the center-left Democratic Party (PD) and the anti-establishment Five Star Movement (M5S). Despite vast political differences, the unusual alliance prevented snap elections which could have favored the far-right League Party.
CNN’s Stephanie Halasz contributed to this report.