Citing his age and health, Pope Benedict XVI said he will step down at the end of February, the first pontiff to step down in six centuries.
"After having repeatedly examined my conscience before God, I have come to the certainty that my strengths, due to an advanced age, are no longer suited to an adequate exercise of the Petrine ministry," the pope said in a message to cardinals on Monday.
Benedict said that in the modern world "both strength of mind and body are necessary, strength which in the last few months, has deteriorated in me to the extent that I have had to recognize my incapacity to adequately fulfil the ministry entrusted to me."
The 85-year-old Pope said, "For this reason, and well aware of the seriousness of this act, with full freedom I declare that I renounce the ministry of Bishop of Rome, Successor of Saint Peter, entrusted to me by the Cardinals on 19 April 2005, in such a way, that as from 28 February 2013, at 20:00 hours, the See of Rome, the See of Saint Peter, will be vacant."
The dramatic announcement of the German-born Pope triggered rapid speculation about his successor. The Religion Editor for Reuters news agency Tom Heneghan blogged it might be time for the Roman Catholic Church to elect a non-European leader and it could be a Latin American.
"The region already represents 42 percent of the world's 1.2 billion-strong Catholic population, the largest single block in the church, compared to 25 percent in its European heartland," he wrote.
Benedict said a conclave to elect the new Supreme Pontiff would have to be convoked to choose his successor.
In past centuries there has been a mourning period that follows the death of a pontiff, but this will not take place and a meeting of the cardinals to elect his successor, called a conclave could start by mid-March.
The resignation will take more than 1.2 billion Catholics throughout the world by surprise as he is the first pontiff to step down was Pope Gregory XII in 1415.
In the case of Gregory XII, he was forced out of office with the church facing a split.
As Cardinal Joseph Ratzinger, Pope Benedict XVI was viewed as more theologically conservative than his predecessor Pope John Paul II. Benedict was strongly opposed to homosexuality within the church, ordaining women priests and to stem cell research.
On the subject of same-sex marriage Benedict said, "There is a need to acknowledge and promote the natural structure of marriage as the union of a man and a woman in the face of attempts to make it juridically equivalent to radically different types of union."
The resignation of Pope Benedict XVI has brought words of respect and appreciation from the general secretary of the World Council of Churches, the Rev. Olav Fykse Tveit.
"We have to respect fully the decision of His Holiness Pope Benedict XVI to resign," Tveit said from New York where he was visiting the WCC United Nation office. "With deep respect I have seen how he has carried the responsibility and burdens of his ministry in his advanced age, in a very demanding time for the church."
Tveit added, "I express my appreciation for his love and commitment to the church and to the ecumenical movement."
The Archbishop of Canterbury, Justin Welby, the spiritual head of the Anglican Communion, who was church, has said he learned of the pope's resignation with a "heavy heart but complete understanding".
"As I prepare to take up office I speak not only for myself, and my predecessors as archbishop, but for Anglicans around the world, in giving thanks to God for a priestly life utterly dedicated, in word and deed, in prayer and in costly service, to following Christ."
The Archbishop of York, John Sentamu, the second most senior cleric in the Church of England said, "With the news that Pope Benedict XVI will resign at the end of February, the Christian world will miss a great theologian with great spiritual depth.
"We should remember Pope Benedict communicated the revelation of God in a characteristic way as a true successor of St Peter. He was unafraid to proclaim the Gospel and challenge a culture that is so self-referential, managing to lift our eyes to God's glory. "
The Taoiseach of Ireland, Enda Kenny, who last year strongly criticised the church for its handling of past abuses of children in the deeply Catholic country praised Benedict for his strong leadership.
"This is clearly a decision which the holy father has taken following careful consideration and deep prayer and reflection. It reflects his profound sense of duty to the Church, and also his deep appreciation of the unique pressures of spiritual leadership in the modern world," Kenny said.