* Shi'ite Muslim rebels seize Hadi's residence
* May also have fallen foul of predecessor Saleh
* Unassuming former general built no power base
By Noah Browning
Jan 22 (Reuters) - Yemen's President Abd-Rabbu Mansour Hadi, held virtual prisoner at his home by political adversaries this week, resigned on Thursday, his two-year-old attempt to steer the fragile country to stability exhausted by opposition from Houthi rebels.
His term as head of state of the poor Arabian peninsula state may also have fallen foul of less visible opposition from his predecessor, veteran former strongman Ali Abdullah Saleh.
Although parliament promptly rejected his offer to step down, Hadi said he had reached "a dead end" after repeated confrontations with the Houthi movement, which seized the city in September, becoming the country's de facto top power.
The former army general's departure deals a blow to a crumbling Yemeni state, which at times has acted as a bulwark against total warfare among a kaleidoscope of feuding politicians and sectarian militants - all heavily armed.
The Houthis have not been Hadi's only headache.
Diplomats say the movement's entry into Sanaa was made possible by a tactical alliance with his predecessor, Saleh, who retains wide influence, especially in the army, despite having stepped down in 2012 after months of Arab Spring protests.
Saleh's critics widely accuse him of making common cause with the rebels to settle old scores and undermine Hadi, despite himself having fought several wars against the rebels in the mountainous North.
The regular army appeared to make little attempt to assist Hadi's presidential guards this week when they fought battles with Houthi forces in a flare-up of tension, an indication, some Yemenis believe, of Saleh's continued favour to the Shi'ites.
The only name on the ballot for February 2012 elections, Hadi was the meant to guide predominantly Sunni Yemen through a transition to democracy shepherded by Western and regional powers after Arab Spring protests ousted his autocrat predecessor the year before.
Inheriting a nation in chaos, Hadi faced long odds: the economy was collapsing, al Qaeda repeatedly struck at the army and state while secessionism festered in the North and South.
Despite years of service as Saleh's deputy, Hadi has suggested his former boss made no attempt to help him settle into the top job. In a speech earlier this month, state media reported Hadi as saying that when he took office "all I received was the republican flag."
A former army general from Yemen's once independent and socialist South, Hadi moved to the North amid political turmoil at home in 1986, rising through the ranks to become Saleh's vice-president for two decades.
Soft-spoken and unassuming, 69-year old Hadi was hardly considered a rival by the former strongman, but he appears not to have won a firm power base during his decades in uniform and a series of political and military setbacks battered his administration.
Hailing from a sect of Shi'ite Islam, the Houthi rebel movement steadily pushed southward toward Sanaa last year, trading its traditional demand for regional autonomy for a chance at becoming national power brokers.
When the capital finally fell with weak resistance from the army on September 21, Hadi sensed Saleh had helped lay him low.
"I realize you're surprised at the handing over of state and military institutions this way - this conspiracy defies the imagination," he told a group of top political and security chiefs at his headquarters.
"There's a planned conspiracy, and alliances among the former stakeholders itching for revenge."
After the United Nations Security Council slapped Saleh with sanctions for his alleged role in the upheaval, the ex-leader's party cut Hadi from the former ruling party and increased his isolation.
His policy appeared to drift as the Houthis fanned out across the country's South and West, engaging in pitched battles with Sunni tribes and Yemen's al-Qaeda affiliate - which claimed the deadly attack on a magazine in Paris this month and which is widely considered the deadliest offshoot of the militant group.
"The man's time in office have been marked by his inability to take timely decisions, letting problems pile up and causing his failure to interact with developments," author and political analyst Abdul-Bari Taher told Reuters.
Al-Qaeda claimed credit for a series of spectacularly gory attacks in the capital against Houthi militiamen and security forces, while the enfeebled president wrangled with the capital's Houthi masters over a new draft constitution.
The political arm-wrestle deteriorated into an open fight when Houthi gunmen abducted Hadi's chief of staff Ahmed Awad bin Mubarak on Saturday, and heavy shelling and gunfire between army factions and the fighters began to convulse Sanaa on Monday.
Houthi fighters entered the presidential palace and positioned themselves outside his private home, where he actually lives, replacing his regular guards.
Hadi issued a statement on Wednesday signalling he was willing to accede to Houthi demands for more power, but also saying the guards outside his house would be removed. By Thursday afternoon, they remained in place, another humiliation.
Hours later he issued his resignation letter to the speaker of parliament.
"We apologise to you personally and to the honourable chamber and to the Yemeni people after we reached a dead end," a government spokesman quoted Hadi's resignation letter as saying. (Editing by Raissa Kasolowsky, William Maclean and Anna Willard)