Pakistan's MQM party says it is leaving Prime Minister Yusuf Raza Gilani's coalition to join the opposition. The move will deprive Mr Gilani of his majority in parliament.
The Muttahida Qaumi Movement, the second largest party in the coalition, withdrew two ministers from the federal cabinet last week.
Mr Gilani denied his government was in danger of collapsing. "I don't see any crisis," he said, speaking on television after the announcement.
The BBC's Aleem Maqbool in Islamabad says the government is now scrambling to find new partners, but that without them, new elections are likely.
Pakistan's governing coalition held 181 seats - including the MQM's 25 - in the 342-member parliament. The MQM's departure leaves Mr Gilani's Pakistan People's Party well below the 172 seats needed to preserve its majority.
Fuel prices
A statement issued by the party said: "Right at the start of the new year the government has raised the prices of petrol and kerosene oil which is unbearable for the people who are already under pressure from the already high prices."
Our correspondent says the move comes as a surprise.
"We have decided to sit on opposition benches because the government has not done anything to address the issues we have been protesting about," said Faisal Sabzwari, a MQM regional minister in Sindh province.
The MQM dominates politics in the city of Karachi.
The city, which the capital of Sindh province, has seen ethnic tension, with the MQM's militant wing widely believed to be behind most ethnic and political killings in the city over the last few years.
A smaller coalition partner, the Jamiat-i-Ulema Islam party, withdrew from the government earlier in December after one of its ministers was sacked.
Many in Pakistan believe the two parties are acting at the behest of the security establishment to undermine the country's political system.
