"I hereby confirm I have abrogated the 1997 constitution and appointed myself as head of state in the new order," Iloilo said in the address.
The move came one day after the country's second-highest court ruled that armed forces chief Commodore Frank Bainimarama's government that took power after a 2006 coup was illegal, effectively creating a power vacuum.
In response, Bainimarama went on national television to announce he had met Iloilo and told him he was relinquishing the prime minister's post. He said the armed forces would continue to enforce security.
Observers said Friday's announcement by the aged and ailing Iloilo had the stamp of Bainimarama, and that the measures he announced appeared to prepare the way for the president to reappoint Bainimarama as prime minister.
"It looks like a prepared statement by Bainimarama, delivered by Iloilo," Rod Alley, a senior fellow at New Zealand's Center for Strategic Studies, told The Associated Press. "This is extraordinary and doesn't look good for Fiji."
Iloilo said he would appoint an interim prime minister soon. "You cannot have a country without a government," he said. "The machinery of government must continue."
Under the constitution, Fiji's president has a mostly ceremonial role as head of state and governing power is held by an elected prime minister and cabinet.
Iloilo also said Fiji would hold elections in 2014.
The date of those elections - which are supposed to restore democracy - has been a sore point both domestically and internationally since Bainimarama seized power in December 2006 - the country's fourth coup in 20 years.
Bainimarama has long promised elections but has balked at setting a timetable, saying he would overhaul the constitution and electoral laws first - a process likely to take years.
Bainimarama has been under intense international pressure - led by Australia and New Zealand - to hold elections this year under the existing constitution. U.S. Secretary of State Hillary Clinton this week backed that view.
A three-judge Court of Appeal panel on Thursday upheld a challenge to Bainimarama's rule by ousted Prime Minister Laisenia Qarase, saying the military government was illegal and urging Iloilo to replace it with an interim government.
U.N. Secretary-General Ban Ki-moon appealed for calm following the ruling and urged "full respect for human rights, the rule of law and the judicial process," U.N. spokeswoman Michele Montas said. She added that the U.N. is reviewing its role in mediating the crisis.
Bainimarama seized power after months of bickering with Qarase, whom he accused of discriminating in favor of indigenous Fijians who made up his power base and against the large ethnic Indian minority.
After the coup, Bainimarama persuaded Iloilo to formally install his government to prevent further instability - a move that Bainimarama claimed made his government legitimate.
Fiji has been internationally isolated ever since, and its tourism and sugar-export dependent economy has plunged, sending more of the nation's 800,000 population into poverty.
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Associated Press writer Ray Lilley in Wellington, New Zealand, and Edith M. Lederer at the United Nations contributed to this report.
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