Liz Truss announced her resignation after a chaotic 44 days in office, during which she lost the trust of Tory MPs and the public and oversaw economic turbulence.
Ms Terse said she could no longer carry out the mandate she was elected to serve as Conservative leader.
Ms Truss said she had told King Charles III that she was stepping down as leader of the Conservative Party.
She said she would stay on as prime minister until a successor is chosen in next week’s leadership election.
Ms Truss is set to become the shortest-serving prime minister in history after battling an open rebellion from the Conservatives who demanded she leave.
It comes just over 24 hours after she told MPs she was “a fighter, not a quitter”.
Alongside her husband Hugh O’Leary, Ms Truss said: “I came into office at a time of great economic and international instability.
“Families and businesses were worried about how to pay their bills.”
She said Britain had been “held back by low economic growth for too long”.
Speaking in Downing Street, she added: “This morning I met the chairman of the 1922 Committee, Sir Graham Brady.
“We agreed that leadership elections will be held next week.
“This ensures that we stay on track to meet our fiscal plan and maintain our nation’s economic stability and national security.
“I will remain as Prime Minister until a successor is chosen.