He was appointed to the Lords by Margaret Thatcher in 1988, serving as leader of the Tories in the upper house for the past 15 years.
Lord Strathclyde, 52, was never fully behind Nick Clegg's Lords reform plans and friends say that with that battle behind him now would be a good time to go.
In his resignation letter he wrote: "When I was invited to join the Government by Margaret Thatcher in 1988, I never believed it was a career for life.
"I didn't expect it to consume me for as long as it has or that I would one day lead the Lords and sit in a Cabinet.
"I always promised myself that when I leave I would do so when I could make a smooth handover to a strong successor. Whatever my feelings on the matter, reform of the Lords is effectively over and now is a good time to mange that handover."
David Cameron responded by expressing his sorrow at his departure but said: "After a quarter of a century on the front bench I entirely understand your desire to pursue other interests.
"You have been an outstanding Leader of the Lords."
Although serving a relatively distinguished political career, his personal life was hit by scandal in 2011 when the Mirror exposed his alleged affair with a "penniless single mother".
Lord Hill of Oareford will replace Lord Strathclyde. Lord Hill served as political secretary to John Major when he was PM and became a life peer in 2010.
He famously tried to quit after the cabinet reshuffle last year, but Cameron was apparently so distracted he failed to hear.