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Humza Yousaf is to stand down Scotland’s first minister once a successor is found.
He said he had made the decision after spending the weekend reflecting on what was best for the SNP, the government and the country.
Mr Yousaf said he had concluded that someone else would need to take over in order to “repair our relationship across the political divide”.
It follows the collapse of the SNP’s power-sharing deal with the Greens.
Mr Yousaf’s decision to end the agreement angered the Greens and left him struggling to secure enough support in order to lead a a minority government.
He had been facing two votes of no confidence later this week that he was not certain to win, with the Greens saying they would vote to remove him as first minister.
Speaking at his official Bute House residence in Edinburgh, Mr Yousaf admitted that he had “clearly underestimated” the hurt he had caused the Greens by ending the agreement in the manner that he did.
He said: “After spending the weekend reflecting on what is best for my party, for the government and for the country I lead, I’ve concluded that repairing our relationship across the political divide can only be done with someone else at the helm.
“I have therefore informed the SNP’s national secretary of my intention to stand down as party leader.”
His resignation comes just 13 months after Mr Yousaf won the contest to succeed Nicola Sturgeon as first minister and SNP leader.
Whoever is chosen to replace him will be the seventh person to hold the post since the Scottish Parliament was established in 1999.
Mr Yousaf said: “I cannot tell you what an honour it is being the first minister of the country I love, the country I am raising my family in and the only country I will ever call home.”
Mr Yousaf added: “As a young boy born and raised in Scotland, I could never have dreamt that one day I would have the privilege of leading my country.
“People that looked like me were not in positions of political influence let alone leading governments when I was younger.
“We now live in a UK that has a British Hindu PM, a Muslim mayor of London, a black Welsh First Minister and, for a little while longer, a Scots Asian first minister of Scotland.”
Opposition parties in the Scottish Parliament had tabled two confidence votes – one in the first minister and another in the SNP government as as whole.
Mr Yousaf had written to the other party leaders asking them to find “common ground” ahead of the confidence votes, but was facing a battle to save his political future with his government no longer having a majority of seats in parliament.
Winning the vote could have meant reaching an agreement with Ash Regan – a former SNP MSP who defected to Alex Salmond’s Alba Party after losing to Mr Yousaf in the SNP leadership contest.
Mr Yousaf had reportedly ruled out having the SNP cut a deal with Alba, despite both parties supporting independence, ahead of this decision to quit.
Scottish Labour has previously said its motion of no confidence in the Scottish government would remain tabled even if Mr Yousaf resigns.
Its leader, Anas Sarwar, said Scotland was facing the biggest challenges since devolution but but was being government by a “dysfunctional, chaotic and divided” SNP government.
He added: “They cannot impose another unelected first minister on Scotland in a backroom deal – the people of Scotland should decide who leads our country.
“There must be an election – it’s time for change.”
The UK government’s Scottish secretary, Alister Jack, said Mr Yousaf’s resignation was the right thing for him to do, adding: “Humza Yousaf’s leadership has lurched from crisis to crisis from the very start, and he could not command the confidence of the Scottish Parliament.
“Scotland now needs a stable, functioning Scottish government focused on the issues that matter most to people – fixing public services and growing the economy.”