Vande Lanotte tendered his resignation on Wednesday (26 January) to King Albert II, who immediately accepted it.
The Flemish socialist senator had already tendered his resignation on 6 January but the king rejected it and re-appointed him to try and broker a compromise between the seven parties involved in the talks – four Flemish and three francophone.
"I informed the King that the impasse had not been broken and that there was no real prospect of progress. It has not been possible to get the seven parties back to the negotiating table," Vande Lanotte said, reading from a statement.
The former leader of the Flemish socialists had been trying since late October to hammer out a compromise between the divided political leaders in the Dutch north and the French-speaking south to form a coalition government.
But the negotiations have stumbled once again over demands by Flemish parties to transfer more powers to the country's regions – including health and social security benefits.
French-speaking parties said these demands went too far and would lead to a de facto splitting of the country, while the Flemish parties accuse them of resisting any meaningful institutional change.
King Albert II will start consulting with party leaders today but seems to have few options – appointing someone else as a mediator or calling for new elections.
Observers say new elections would likely deepen the split between Dutch and French speakers and could mark a further step towards the country's break-up.
Belgium, the country that hosts the EU institutions, has been governed by an interim cabinet for over 200 days since general elections in June saw Flemish separatist party N-VA become the largest political force in the north.
The news of Vande Lanotte's resignation sent jitters to the markets, with Belgian bonds declining further yesterday. The extra yield investors demand to hold Belgian 10-year bonds instead of German equivalents, Europe's benchmark, widened three basis points to 110, Bloomberg reported.