About 25,000 people waving flags gathered in what appeared to mark a new era of political openness in the Arab world.
Protesters surround the Martyr's Monument in Beirut
The protest brought both hope for the future and fears of a return to the terrible days of the 1975-1990 civil war.
Few had expected the government of the pro-Syrian prime minister, Omar Karami, to survive a vote of confidence but the speed of his capitulation came as a surprise.
Before 40 opposition MPs even had time to make their speeches denouncing him, he announced the resignation of his government. The crowd outside whistled, screamed and launched rockets into the evening sky.
The effect of the protest marked a major change in Middle East politics where authoritarian regimes traditionally crush dissent. Some protesters drew parallels with the 1989 Velvet Revolution in Prague and last year's events in Ukraine.
But in a country where power is seldom transferred peacefully, Mr Karami sounded a sombre note.
"May God preserve Lebanon,'' he said. "I am keen that the government will not be a hurdle to those people who want good for this country.''
Washington, which has been pushing hard for Syria to pull its troops out of Lebanon, welcomed the resignation as "an opportunity for the Lebanese people to have a new government that is truly representative of their country's diversity". It should be formed "free of all foreign interference".
But even as Beirut was exploding with joy, a supporter of Mr Karami was shot dead in the northern city of Tripoli.
It now falls to President Emile Lahoud, who is even closer to Syria than Mr Karami, to cobble together a government in a country where divisions between Sunni, Shia, Druze and Christian have often led to bloodshed.
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The demonstrators, who spent all day outside parliament in defiance of Mr Lahoud's orders to disperse, said they would not leave until he resigned too and Syria had promised to withdraw its 13,500 troops.
The crisis began with the St Valentine's Day murder of the popular former prime minister, Rafik al-Hariri, who dared to stand up to Syria.
For 30 years, Damascus, which regards Lebanon as part of Greater Syria, has exploited Arab hatred for Israel and religious divisions to justify its role in the country.
But it is facing growing diplomatic pressure to withdraw - pressure that intensified further with Israel accusing it of involvement in last Friday's suicide bombing in Tel Aviv.
