While there had been speculation that he might leave office this year, his move took most by surprise since he has been battling on, both in the courts and in an official tribunal.
News of Mr Ahern's departure received a mixed reaction in the Irish Republic but drew warm tributes from Gordon Brown and Tony Blair as well as, more surprisingly, compliments from Northern Ireland Unionists such as the Rev Ian Paisley. The favourite to succeed him is the experienced Brian Cowen, who was Minister for Foreign Affairs and is currently Finance Minister.
Mr Ahern was insistent that despite the welter of allegations concerning his financial affairs he had never taken a corrupt payment, declaring: "I know in my heart of hearts that I have done no wrong."
It has nonetheless become obvious that his explanations for a series of unorthodox money transfers were not believed by the public and that the issue was causing increasing concern within his own party.
Last May he led Fianna Fail to a historic third successive general election win. At that point he appeared master of the political scene after ten years as premier.
He will be remembered for his contribution to the peace process which has led the Northern Ireland troubles to rest, and for his capable handling of the unprecedented boom in the Irish Republic's economy.
He can however expect to face further attention from the official tribunal which has for years carried out the most exacting scrutiny of his unconventional financial affairs. He has mounted a robust but ultimately unsuccessful defence of his behaviour.
Yesterday he said the important work of the government was being overshadowed by the tribunal, adding: "The constant barrage of commentary on tribunal related matters has and I believe will continue to dominate the political agenda at an important point for our country.
"Never in all the time that I served in politics have I ever put my personal interest ahead of the public good.
"I look forward to the completion of the tribunal's work, confident that when it reports, the tribunal will find that I have not acted improperly in any way."
Mr Ahern's credibility has been severely dented by revelations from the tribunal and it is not known whether further damaging disclosures are on the way.
He announced his departure at a hastily-arranged news conference at Government Buildings in Dublin, flanked by senior ministers. Mr Ahern, who appeared emotional, was later given a standing ovation when he appeared in the parliament chamber.
He will step down after a visit to Washington to address Congress, an occasion which is regarded in Ireland as a signal honour. His successor will be chosen by Fianna Fail members of parliament.
The party heads a coalition government, some of whose members had expressed disquiet about the continuing revelations. It is not yet clear whether Mr Cowen will face a challenge from some of the party's more junior ministers.
Mr Ahern's credibility received a grievous blow last month when his former secretary broke down in the tribunal witness box when confronted with documentation from a bank. Since then allegations of perjury have been made.
The Fine Gael leader Enda Kenny said: "The Taoiseach has bowed to the inevitable based on the weight of his own evidence at the tribunal."
A warmer farewell came from Northern Ireland's First Minister, the Rev Ian Paisley, who said: "I enjoyed a good working relationship with Mr Ahern because he was willing to recognise the position of the unionist population that they had no interest in being part of a united Ireland. He and I operated as equals, not as one trying to assimilate the other."
The former Unionist leader Lord Trimble said Mr Ahern had improved north-south relations, which had been "toxic" and moved them to "a situation where they ran smoothly".
The Sinn Fein President Gerry Adams said: "What we saw today was a Tao-iseach bowing out in a very gracious and graceful way and we should look at the good things that he has done as well as the not so good things that he has done."
Gordon Brown said: "Bertie Ahern has been an outstanding statesman and has made an historic contribution in helping to bring peace to Northern Ireland and transforming Ireland`s relationship with the UK."
Tony Blair said of Mr Ahern: "He will have, deservedly, a central place in his nation's political history and much more widely – a remarkable man with a remarkable record of achievement."
Ireland's roll of dishonour
* Charles Haughey
Disgraced one-time prime minister Charles Haughey narrowly avoided a prison sentence due to age and infirmity after admitting to a tribunal, following years of denials, that he had accepted millions of pounds. Detailed investigations linked him to bribery and corruption, tax evasion and doing illicit favours for big business.
* Liam Lawlor
Lawlor served three prison sentences for standing in contempt of tribunals and refusing to cooperate. He was condemned for concealment, failure to produce documents and outright lies. A presiding judge stormed out, enraged at what were described as his "convoluted explanations, wearisome excuses and lame protestations."
* Ray Burke
A one-time justice minister and foreign minister, he was jailed for six months for tax evasion, after pleading guilty to charges of failing to declare 116,000 Irish pounds in a single year. Despite rumours linking him to corruption, he was appointed to the cabinet by Bertie Ahern, who said he had check the reports and found them groundless.
* Charles Haughey
Disgraced one-time prime minister Charles Haughey narrowly avoided a prison sentence due to age and infirmity after admitting to a tribunal, following years of denials, that he had accepted millions of pounds. Detailed investigations linked him to bribery and corruption, tax evasion and doing illicit favours for big business.
* Liam Lawlor
Lawlor served three prison sentences for standing in contempt of tribunals and refusing to cooperate. He was condemned for concealment, failure to produce documents and outright lies. A presiding judge stormed out, enraged at what were described as his "convoluted explanations, wearisome excuses and lame protestations."
* Ray Burke
A one-time justice minister and foreign minister, he was jailed for six months for tax evasion, after pleading guilty to charges of failing to declare 116,000 Irish pounds in a single year. Despite rumours linking him to corruption, he was appointed to the cabinet by Bertie Ahern, who said he had check the reports and found them groundless.
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