Muscat plans to step down as Labour Party chief and prime minister in early January.
Muscat spoke in a televised message, informing the public that the ruling Labor Party will begin the process of choosing a new leader on January 12 and that "in the days after I will resign as prime minister".
Muscat is first stepping down as leader of the Labour party. Prime Minister Joseph Muscat is under pressure to resign.
Malta's casino owner Yorgen Fenech was charged with involvement on Friday in the 2017 murder of anti-corruption journalist Daphne Caruana Galizia, a case that ultimately brought down the government of Malta.
He had met for four hours with Labour's parliamentary group during which they gave "unanimous support to all decisions which the prime minister will be taking".
A businessman with alleged links to the government was charged Saturday with complicity in Galizia's murder.
Caruana Galizia, 53, was killed by a auto bomb as she drove out of her home in Bidnija, seven miles (11 km) from Valletta, just half an hour after writing a blog describing Schembri as "a crook".
The full story of how Caruana Galizia's killing was orchestrated remains unclear, but protesters in recent days had called for Muscat's resignation, saying he was presided over a country where coverup and impunity reigned.
On Saturday, party insiders told AFP that Mr Muscat was ready to go once those behind the killing had been charged.
He family is calling for thorough investigations into Mr. Schembri, Mr. Mizzi and Mr. Cardona.
Leaked emails printed in court indicated that every Schembri and Mizzi stood to receive payments from a Dubai company called 17 Sad, owned by Fenech.
"When he came to power, Muscat by many was considered too young, too go-getting, too self assured", a local newspaper has said, adding however that he injected a "fresh feeling" into the party.
The meeting also included the controversial reinstatement of Chris Cardona as economy minister.
Caruana Galizia, a popular journalist and blogger described as a "one-woman WikiLeaks", exposed cronyism and sleaze within the country's political and business elite.
Schembri has denied any connection with the letter.
Galizia's family said Muscat should not preside over an investigation that implicates three of his closest colleagues. Muscat also said that "our institutions are strong and they function". They have pleaded not guilty in pre-trial proceedings.
The government had earlier turned down Mr Fenech's request for immunity from prosecution in return for revealing information about the murder plot and about alleged corruption involving Mr Muscat's former chief of staff Keith Schembri and former Tourism Minister Konrad Mizzi, among others, court filings showed.