"It is important not to overestimate" the move, Marta Halpert, director of the Anti-Defamation League's Vienna-based Central Europe office said. "It is a tactical move designed to take a little pressure off the government. The question is whether it will be acknowledged.
"Haider's influence remains," she said. "The party is not headless."
Haider announced his resignation as leader of the Freedom Party, known as the FPO, during a closed-door meeting of the party leadership Monday night.
Explaining the move, he said he wanted to concentrate on his job as governor of Austria's southern state of Carinthia.
He turned the party leadership over to close aide Susanne Riess-Passer, who serves as vice chancellor in the center-right coalition led by Chancellor Wolfgang Schuessel.
Haider, who himself is not a member of the Cabinet, told a news conference Monday night that the "double commitment" of being party leader and governor was "too much for anyone."
But he also said he had no intention of disappearing permanently.
"I want to make clear that I am not running away from national politics, just making a new constellation in our party leadership," he said.
Asked if he still hoped to be chancellor one day, he replied: "I do not exclude it."
The entry of the Freedom Party into government Feb. 4 polarized the country. It triggered domestic and foreign protests, including diplomatic isolation by Austria's 14 European Union partners and other countries, including Israel.
The Freedom Party won 27 percent of the vote in Austria's elections last October, becoming the country's second largest party and the strongest far- right force in Europe.
The party ran on an anti-immigrant, law-and-order platform. Haider, the son of Nazi sympathizers, won notoriety in past years by praising aspects of Hitler's Nazi Reich. He has repeatedly apologized for the remarks.
Haider's resignation did not impress foreign leaders.
Israel, which withdrew its ambassador to Vienna even before the new government was sworn in, said it would not return its envoy.
Asked if the ambassador would return, Foreign Minister David Levy told reporters Tuesday, "Unequivocally, no."
The prime minister of Portugal, whose country holds the rotating E.U. presidency, was also far from impressed by the resignation.
"The problem is not Joerg Haider, but what his party represents," Anotonio Guterres said Tuesday.
A spokesman for the German Foreign Ministry was skeptical that the resignation would be enough to change the European Union's isolation of Austria, adding, "Our position is unchanged."
The United States said it would closely monitor developments.
Haider's resignation "doesn't change our concerns. The Freedom Party is still part of the government," said State Department spokesman James Rubin.
"We will react swiftly and firmly to any statements or actions suggesting sympathy with Nazi-era policies, or that express racism, xenophobia or anti-Semitism," he said.
Haider denied that he was stepping down as the result of political pressure.
"We are accustomed to making our own decisions," he said.
For most Austrians, the charismatic 50-year-old politician is the embodiment of the FPO.
Haider took over party leadership in 1986 and, with his populist policies playing on xenophobia and promising a return to traditional values, transformed the party from a minuscule political force into the country's second largest party.
He said his resignation was intended to dispel speculation that he was pulling the strings from Carinthia, but friends and foes alike said Haider certainly will continue to wield political power.
"His influence will still be felt in the party -- and this is for the good," Peter Sichrovsky, an FPO member of the European Parliament and one of the few Austrian Jews known to support the party, told the BBC.
He called foreign reaction to Haider "hysteria" that "no one takes seriously."
Sichrovsky -- who before he associated with Haider, authored a best-selling book, "Born Guilty," about the children of Nazis -- praised Haider and the FPO for "ending a thoroughly corrupt regime."
"Change is the basis of democracy," he said. "We are the second and third generations after the war -- we are responsible for our democracy."
Many commentators said Haider's decision could actually be designed as a means for him to consolidate power.
Vienna's conservative Die Presse newspaper called it a shrewd move that would enable him to distance himself from unpopular government decisions such as planned tax increases and to position himself for the next election, due within four years.
BBC correspondent Katya Adler agreed, noting that while the FPO made a strong showing as an opposition party, it so far has made "a feeble impression in government, breaking several of its key election promises, such as not to increase taxes or raise the minimum pension age."
By remaining nominally based in Carinthia, Haider can also disassociate himself from errors committed by the FPO ministers in government, who have been branded "a gang of amateurs'' by opponents.