Barclays chief executive Bob Diamond has resigned with immediate effect, the bank said on Tuesday.
The move comes days after the bank was fined a record £290m for manipulating the Libor, the rate at which banks lend to each, and amid growing calls for Diamond to step down.
In a statement on Tuesday morning he said: "No decision over that period was as hard as the one that I make now to stand down as chief executive.
"The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen.
"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."
Speaking on BBC Radio 4's Today programme on Tuesday, Chancellor George Osborne said Diamond’s resignation was “the right decision for Barclays” and the “right decision for the country”.
In a statement, Labour leader Ed Miliband said that Diamond's resignation was "necessary and right," adding: "It was clear Bob Diamond was not the man to lead the change that Barclays needed.
"But this is about more than one man. This is about the culture and practices of the entire banking system which is why we need an independent, open, judge-led, public inquiry."
The CEO's decision to quit follows that of Barclays chairman Marcus Agius, who stood down on Monday. The bank said he will now become the full-time chairman "pending the appointment of a new Chief Executive."
The 60-year-old banker resigned after growing calls to step down over the Libor scandal
Diamond faced growing questions about how much he knew about what was going on after it emerged that Barclays staff mistakenly thought they had been instructed by the Bank of England to lie in their Libor submissions.
The CEO had written to staff at the bank on Monday saying it was his "responsibility to make sure" another scandal could not happen again.
Diamond, who was once dubbed the "unacceptable face of banking" by Lord Mandelson, showed no sign of stepping down on Monday as he pledged to see an internal review into Barclays' practices through to implementation.
Diamond confirmed he would still appear at the Treasury Select Committee on Wednesday, saying: "I look forward to fulfilling my obligation to contribute to the Treasury Committee's enquiries related to the settlements that Barclays announced last week without my leadership in question.
"I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry."
Of Diamond, the outgoing Agius said: "[He] has made an enormous contribution to Barclays over the last 16 years of distinguished service to the group, building Barclays Investment Bank into one of the leading global investment banks in the world. As chief executive he has led the bank superbly."
As he resigned on Monday, Agius announced an internal review into the bank's "flawed" practices.
Diamond, who has courted controversy for his hefty pay packages, which in 2011 alone totalled close to £18m, told employees in a letter on Monday: "I am committed to ensuring the recommendations of this review are implemented in full."
The memo emerged after the Serious Fraud Office said it hoped to decide within a month on whether a criminal prosecution in relation to the rate-fixing was appropriate.
But despite his attempts to rally staff, Diamond faced increasing calls from politicians, financial campaigners and former Barclays directors to follow Agius and step down.
Labour leader Ed Miliband on Monday said the resignation of Agius from Barclays was not enough, and repeated his call for Diamond to step down.
He added: "I want to see criminal sanctions against those who broke the law."
The Bank of England was also drawn into the affair after it emerged that staff mistakenly thought they were instructed by the central bank to lie in their rate submissions.
The Financial Services Authority's report said there had been a misunderstanding arising from a conversation between Bank Deputy Governor Paul Tucker, a favourite for the Governor role, and an unidentified senior Barclays manager on 29 October 2008.
Read Barclays' full statement below:
Barclays today announces the resignation of Bob Diamond as Chief Executive and a Director of Barclays with immediate effect. Marcus Agius will become full-time Chairman and will lead the search for a new Chief Executive. Marcus will chair the Barclays Executive Committee pending the appointment of a new Chief Executive and he will be supported in discharging these responsibilities by Sir Michael Rake, Deputy Chairman.
The search for a new Chief Executive will commence immediately and will consider both internal and external candidates. The businesses will continue to be managed by the existing leadership teams.
Bob Diamond said "I joined Barclays 16 years ago because I saw an opportunity to build a world class investment banking business. Since then, I have had the privilege of working with some of the most talented, client-focused and diligent people that I have ever come across. We built world class businesses together and added our own distinctive chapter to the long and proud history of Barclays. My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as Chief Executive. The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen.
I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth. I know that each and every one of the people at Barclays works hard every day to serve our customers and clients. That is how we support economic growth and the communities in which we live and work. I look forward to fulfilling my obligation to contribute to the Treasury Committee's enquiries related to the settlements that Barclays announced last week without my leadership in question.
I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry."
Commenting, Marcus Agius said, "Bob Diamond has made an enormous contribution to Barclays over the last 16 years of distinguished service to the Group, building Barclays Investment Bank into one of the leading global investment banks in the world. As Chief Executive he has led the bank superbly. I look forward to working closely with the Chief Executives of our businesses and the other members of the executive Committee in leading Barclays world class businesses in serving our customers and clients and delivering value for our shareholders."