The Rev Christopher Brain, the former leader of the Nine O'Clock Service in Sheffield, gave his decision in a letter from his solicitors to the diocese.
The announcement came on the eve of a BBC1 Everyman programme, to be shown tonight, in which Mr Brain is expected to defend his controversial "rave-style" preachings.
The Archdeacon of Sheffield, the Ven Stephen Lowe, said yesterday: "We feel that Mr Brain has quite simply come to the right decision for himself, for the good of the Church and, not least, to satisfy the strongly held feelings voiced by members of the Nine O'Clock Service."
In August Mr Brain, 38, admitted sexually fondling about 20 female followers during "healing" sessions at his home. Shortly afterwards the Archbishop of York banned him from acting as an ordained priest and Mr Brain agreed to be admitted to a mental hospital, paid for by the Sheffield diocese. However, he refused to hand in his resignation, despite the controversy.
Archdeacon Lowe admitted yesterday that there was something "radically wrong" with Mr Brain's leadership style. "His main offence was the abuse of power. Sadly, Mr Brain's abuse of power led him into a lifestyle totally incompatible with that of a priest or anyone else entrusted with the care of other people."
The Everyman programme will also feature personal accounts from some of the women involved in the Nine O'Clock Service. Archdeacon Lowe said: "I believe this to have been a courageous act on their part. The programme itself underlines the many good things about the Nine O'Clock Service as a valid experiment in reaching out to people not normally found in Church and who we have not been reaching with rock buns and Rock of Ages."
The Bishop of Sheffield, the Rt Rev David Lunn, said: "I still find it difficult to understand why the BBC and the media in general have managed to convince themselves that the problems of a single congregation in a single diocese have represented a crisis of management of mega proportions for the Church of England."