Volkswagen CEO Martin Winterkorn says he is stepping down "in the interests of the company" as it grapples with the emissions scandal.
Mr Wintekorn said in a statement: "Volkswagen needs a fresh start - also in terms of personnel. I am clearing the way for this fresh start with my resignation."
He said he was acting in the interests of the company "even though I am not aware of any wrongdoing on my part".
A successor has not yet been announced.
The German car manufacturer has admitted to rigging its diesel cars' emissions to pass US tests.
Mr Winterkorn said he took responsibility for the "irregularities" found in the diesel engines.
He added that VW must continue the process of "clarification and transparency".
"This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis," he said.
Following his statement, VW's share price increased by 8.7% to 121 euro.
Nearly 25 billion euro (£18 billion) has been wiped off the company's market value.
Mr Winterkorn had come under intense pressure since last Friday's disclosure from the US Environmental Protection Agency that the company had tried to dupe testers over emissions coming from its diesel cars.
His contract was scheduled to be extended by two years to 2018 at a meeting of the supervisory board this Friday.
The Environmental Protection Agency has said Volkswagen could face fines of as much as 18 billion US dollars (£11 billion) . Other countries, such as South Korea, have also ordered investigations into emission levels of VW cars and some law firms in North America have filed class action lawsuits.
Volkswagen said 11 million of its vehicles worldwide contained the so-called "defeat device" that allowed the cars to beat the testers. Its revelation was a significant increase on the 482,000 cars previously identified by the Environmental Protection Agency.