The leader of the Georgian rebel region of South Ossetia is set to resign Saturday in a deal with the opposition to end a crisis that has rocked the tiny Russian-backed province, local media reported.

The deal is a victory for opposition challenger Alla Dzhioyeva, who led street protests for 10 days after the supreme court cancelled her surprise leadership election win over a candidate backed by South Ossetia's patron Moscow.

Eduard Kokoity will step down as leader of the region, which was the focus of the 2008 Georgia-Russia war, and be replaced by prime minister Vadim Brotsev until repeat elections in March.

The text of the agreement that was reached overnight said both sides agreed to compromise because of "the profound socio-political crisis in South Ossetia and the threat of further development of civil strife", local official news agency RES reported.

The crisis that started when the court annulled the results of the November 27 leadership polls saw unprecedented round-the-clock demonstrations in South Ossetia, with protesters establishing a tent camp in the main town Tskhinvali despite a high-profile armed security presence.

Fears were raised that tensions could escalate into violence in the heavily-militarised province after a rocket-propelled grenade attack on the prosecutor general's apartment and the arrest of several of Dzhioyeva's supporters.

Russian media dubbed the protests, which continued through subzero temperatures, the "Snow Revolution".

Moscow recognised the independence of South Ossetia and another breakaway Georgian region, Abkhazia, shortly after the 2008 war despite other world powers insisting that both territories remain an integral part of Georgia.

Georgia said the leadership elections were a sham because South Ossetia is "occupied" by thousands of Russian troops stationed there since the war, when most ethnic Georgian inhabitants were expelled.