"My experience of government finishes here," said a downcast Renzi after acknowledging a defeat of almost 60-40 percent over his constitutional reform bid, which threw the future of one of the eurozone's biggest economies into turmoil.

Renzi, 41, will meet President Sergio Mattarella later Monday to hand in his resignation formally after a final cabinet meeting.

Mattarella will then be charged with brokering the appointment of a new government or, if he is unable to do that, ordering early elections.

The euro sank to a 20-month low and most Asian stocks also retreated as investors fretted over the effect the political instability could have on a long-running banking crisis in Italy, and the possibility of elections that could usher in anti-EU parties.

Italy's FTSE MIB stock index tumbled 2.0 percent at the opening before clawing back some ground, underperforming other European markets. Italian bond yields also rose slightly, reflecting investor nervousness.