Erdogan formally called for a new election late yesterday, following an inconclusive vote in June, and the collapse of coalition-building efforts.
Davutoglu has five days to form a temporary Cabinet - which would include opposition party legislators - to oversee the polls. However, two main opposition parties have already declared they would not participate in the interim administration.
The opposition accuses Erdogan of triggering new elections in the hope that the Justice and Development Party, or AKP, which he founded, can win back the parliamentary majority it lost in June and again rule alone.
Erdogan has said the election will take place on November 1 but the date must be confirmed by the High Election Board. Davutoglu is now likely to form an administration made up of independent figures and legislators from Turkey's pro-Kurdish political party who would be taking up ministerial posts for the time in Turkish history.
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That puts Davutoglu in the awkward position of governing with members of the pro-Kurdish party it had ruled out as a coalition partner because of its alleged links to the autonomy-seeking Kurdish rebels.
The new elections deepen uncertainty in Turkey at a time when it is grappling with a sharp increase in violence between security forces and Kurdish rebels and is more deeply involved in the US-led campaign against Islamic State group extremists.
More than 100 people - mostly soldiers and police - have been killed since July in renewed conflict between the outlawed Kurdistan Workers' Party, or PKK, and the security forces, which has wrecked a 2 1/2-year-old peace process with the Kurds.