Barclays chief executive Bob Diamond has resigned with immediate effect in the wake of the rate-rigging scandal.
The American banker, who has faced mounting calls to step down, said: "The external pressure placed on Barclays has reached a level that risks damaging the franchise.
"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."
Tuesday's move comes after Barclays was fined STG290 million ($A446.70 million) by UK and US regulators for manipulating the Libor, the rate at which banks lend to each other.
Chairman Marcus Agius, who announced his intention to resign over the affair on Monday, will lead the search for a new chief executive immediately, Barclays said.
Diamond, who was once dubbed the "unacceptable face of banking" by Lord Mandelson, had shown no sign of stepping down on Monday as he pledged to see an internal review into Barclays' practices through to implementation.
The 60-year-old, who joined the bank 16 years ago, said: "My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as chief executive."
"I know that each and every one of the people at Barclays works hard every day to serve our customers and clients. That is how we support economic growth and the communities in which we live and work."
Diamond confirmed he would still appear before the Treasury Select Committee on Wednesday to answer questions over the rate-fixing allegations which ultimately led to the British government launching a parliamentary probe into banking culture.
He added: "I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry."