Hirchson informed Prime Minister Ehud Olmert of his decision during a phone conversation Sunday morning.
"I received the announcement and wished him luck," OImert told the ministers at the start of the weekly cabinet meeting. "I thanked him for the activities he did right until the last minutes."
Starting Sunday morning, Olmert also holds the Finance portfolio, and plans to continue to do so in the near future.
"I will temporarily fill the role of finance minister, until we make a different decision. I will soon convene a meeting with senior Treasury officials and in order to discuss the developments and receive updates.
"We will continue to carry out all the activities I announced, including the social-economic plan, which Hirchson was part of, which is aimed at the next three years, in order to reduce the poverty rate from 20.2 percent to 17.2 percent."
Education Minister Yuli Tamir said that Hirchson's decision was "desirable," but added that she hoped he would be acquitted.
Immigrant Absorption Minister said that it was a difficult day for the government. "It's his decision, he came to the conclusion that he would be better able to defend himself from a different position. I hope he will be able to defend himself."
'I am biting my tongue'
In a statement issued Sunday afternoon, Hirchson explained that "under the public atmosphere created, I feel that it would not be right to continue serving as finance minister.
"My public responsibility and my conscience were the deciding factor, as well as the recognition that my family members are the ones being harmed, and I should fulfill my responsibility as a family man and be with them at this time, beyond my being a public figure," the suspended minister said.
Hirchson added that he was going through difficult times. "The publications, which include descriptions of my alleged misdeeds, are enough to raise questions even among my friends. I too, had I read the things written about me about someone else, would also immediately see them in a negative light."
"I don’t know if I chose the right way to deal with this, but I definitely did not choose the easy and acceptable way of using harsh words against the legal authorities, the media or the political arena, even if I was critical of some of them," he said, perhaps hinting that he did not act as President Moshe Katsav.
"I preferred to keep quiet, even at the cost of biting my tongue, and I will not speak now as well. I believed, and I still believe, that the authorities should continue with their work, which is aimed at revealing the truth," he added.
On Saturday, police continued to insist that there was sufficient evidence to indict Hirchson on charges of embezzlement.
Major-General Yohanan Danino, head of the Intelligence and Investigations Department in the Israel Police, and Brigadier-General Yoav Segalovich, head of the investigation committee on Hirchson, were scheduled to meet with Attorney General Menachem Mazuz Sunday, to brief him on the investigation. This is the third such meeting with the attorney general.
Hirchson is expected to be questioned in the upcoming week or two, for the fifth time, by the police's Financial Crime Unit.
A week ago, Hirchson was questioned for six hours. Because he is suspected of laundering funds, including tax funds, the investigation contained officials from the Tax Authority.
Hirchson continues to deny the allegations
The police claim to have strengthened their case that Hirchson embezzled funds from the non-profit Nili organization (associated with the National Workers' Organization) while he headed the workers' association.
Hirchson is accused of using the funds to finance a political campaign and cover the illegal gambling debts of one of Nili's directors.
Police have yet to conclude investigations on the charges that Hirchson embezzled funds from other non-profit organizations, including The March of the Living and the Yuvalim pension fund.
Hirchson continues to deny the allegations. Regarding large sums of money transferred to his bank account, the finance minister continues to claim that they were transferred by his son, Ofer, and by a relative living in Switzerland, who allegedly helped Hirchson financially when his wife was sick.
Attila Somfalvi, Tzvi Lavi and Efrat Weiss contributed to the report