Addressing a packed press conference at the Schloß Bellevue in Berlin, Mr Wulff said “The developments of the past few days and weeks have shown that (the German people’s) trust and thus my effectiveness have been seriously damaged.
“For this reason it is no longer possible for me to exercise the office of president at home and abroad as required.”
Wullf, an ally of Chancellor Angela Merkel is embroiled in a scandal over a home loan that he accepted when he was premier of Lower Saxony.
Merkel cancelled a visit to Italy on Friday to deal with the crisis, and she said in a statement that she regretted that he had quit.
The crisis is said by German media as “unprecedented” in post-war Germany.
In a brief statement in front of the media at the Chancellery, Merkel said she accepted his resignation “with respect but also with regret”, adding that “he dedicated himself to the interests of Germany.”
The chancellor said Wulff had “decided to make a step back and put the interests of the general public to the fore.”
In the interim, Horst Seehofer of the Christian Social Union (CSU), the Bavarian sister party of Merkel’s centre-right Christian Democrat party (CDU), will be acting president.
In Germany, the president’s role is largely ceremonial, to serve as a moral authority for the nation.
At the centre of the scandal surrounding Mr Wulff, which escalated in December, is the story – first published by the Bild newspaper – that he received a low interest 500,000 euro loan from the wife of a wealthy businessman in October 2008.
Mr Wulff was later asked in Lower Saxony’s parliament if he had had business relations with the businessman, Mr Egon Geerkens, and said he had not, making no mention of his dealings with Mr Geerken’s wife.
The president was also heavily criticised for trying to force Bild not to break the story in the first place.
On Thursday, prosecutors in Hanover, capital of Lower Saxony, said there were “enough actual indications” that the president had acted improperly.
“Therefore they have asked the president of the German Bundestag [the lower house] to lift the president’s immunity.” The move is formally required to start proceedings against Mr Wulff, although this does not mean necessarily that he will be charged.
The Bundestag’s committee on parliamentary immunity is expected to consider the prosecutor’s request at a session starting on 27 February.
Born in Osnabruck, in then West Germany, in 1959, Wulff studied at the University of Osnabruck, where he met his future wife Christiane. He became active in the Christian Democrat Union at the age of 20.
He challenged Gerhard Schroeder, who would later become chancellor, for the premiership pf Lower Saxony in 1990, but loses.
Wulff wins control of the state in 2003 polls. Becomes on of four deputy leaders of the CDU in 1998 and was picked as president in 2010 by Chancellor Angela Merkel, becoming the country’s youngest president at 51.
Mellisa Sheriddan, ANA Diplomatic Correspondent &
Musah Ibrahim Musah