At CIA headquarters, the director called his agency together to make the announcement.
"This is the most difficult decision I have ever had to make," said George Tenet. "And while Washington and the media will put many different faces on the decision, it was a personal decision and had only one basis in fact, he well being of my wonderful family."
After seven years at the helm of the world's largest intelligence agency, Tenet said he informed the President just last night of his decision.
"He has been a strong and able leader at the agency. He's been a strong leader in the he war on terror and I will miss him," said President Bush.
But Tenet's departure is playing to mixed reviews on Capitol Hill, where a string of apparent intelligence failures has eroded the goodwill he had developed over a career in Washington.
A panel investigating the 9/11 attacks has been harshly critical of the CIA for failing to appreciate the gathering threat from Al Qaeda in the months leading up to the attacks.
Tenet has also come under fire for his absolute assurance to the President that Saddam Hussein was developing weapons of mass destruction in Iraq.
ABC News has learned a report on pre-war intelligence failures being completed by the Senate Intelligence Committee will reflect findings that are "devastating" for Tenet.
While there was praise for the departing director, there are also those who will be glad to see him go.
"If I was President of the United States and went to war on the wrong information, I would have fired the head of the CIA," said Rep. Henry Waxman, a Democrat from California.
Tenet's deputy, John McLaughlin will continue on as acting director.
Reacting to Tenet's resignation, Mississippi Sen. Trent Lott commended the outgoing CIA director for his service.
"I do view it as an opportunity, though, you know, to look for some new blood at the head of the CIA and to look at some improvements or reforms in the intelligence community," said Lott. "I hope the President will seize on this and the Congress. We need to do a better job in Congress of oversight and give the CIA some different directions and the intelligence community, as a whole, in my opinion, needs to be reorganized."
Alabama Sen. Richard Shelby said the resignation is long overdue.
"There were more failures of intelligence on his watch as director of the CIA than any other in our history," said Shelby. "I have long felt that, while an honorable man, he lacked the critical leadership necessary for our intelligence to effectively operate, particularly in the post 9/11 world."
Tenet was appointed to head the CIA by President Clinton in 1997.