Mahinda Rajapaksa, who was appointed Sri Lanka's Prime Minister by President Maithripala Sirisena in a controversial move, resigned on Saturday as two crucial Supreme Court decisions made the embattled former strongman's efforts to cling to premiership untenable.

Rajapaksa informed the lawmakers of the United People's Freedom Alliance (UPFA) that he has resigned from the post, MP Shehan Semasinghe told reporters.

Rajapaksa was appointed the Prime Minister on October 26 by Srisena after sacking Ranil Wickremesinghe, which plunged the country into an unprecedented constitutional crisis.

The Supreme Court on Friday refused to stay a court order restraining Rajapaksa, 73, from holding the office of the Prime Minister until it fully heard the case next month.

The apex court on Thursday unanimously declared that the dissolution of Parliament by Sirisena was 'illegal'.

Pro-Rajapaksa lawmaker Lakshman Yapa Abeywardena had told reporters that Rajapaksa decided at a meeting on Friday with President Sirisena to resign to allow the President to appoint a new government.

Wickremesinghe is expected to take oath as Sri Lanka's Prime Minister on Sunday.

President Sirisena has reportedly agreed to reinstate ousted Prime Minister Wickremesinghe in the post after a discussion with him over the phone on Friday.