Sorrell will be available to assist with the transition.
"As I look ahead, I see that the current disruption we are experiencing is simply putting too much unnecessary pressure on the business, our over 200,000 people and their 500,000 or so dependents, and the clients we serve in 112 countries".
Sorrell had been in the midst of an unspecified investigation about "personal misconduct and misuse of company assets".
"WPP is investigating an allegation of financial impropriety by me, specifically as to the use of company funds", Mr Sorrell said in a statement.
Roberto Quarta, WPP's chairman, will become executive chairman while a permanent successor to Sir Martin is identified, according to insiders.
He worked closely with the brothers Saatchi (Charles and Maurice) and helped fashion its rapid growth, before going solo and acquiring a shopping basket manufacturer Wires & Plastic Products (WPP). I leave the Company in very good hands, as the Board knows.
WPP plans to announce that Mark Read, the chief executive of Wunderman, an agency network it owns, and Andrew Scott, chief operating officer of the group's European business, will take over as interim joint chief operating officers.
Sorrell, who founded the British ad giant and has been at the helm for the past 33 years, stepped down less than a fortnight after the group launched an independent investigation into the allegations.
Read, who previously sat on WPP's main board, is well regarded in the industry while Scott was involved in its acquisition strategy and was not involved with clients. They have not said whether allegations were put to Sorrell resulting in his resignation.
We welcomed J. Walter Thompson, Ogilvy, Young & Rubicam, Grey, 24/7 Real Media, Taylor Nelson Sofres, among so many others.
Those close to WPP have been keen to play down suggestions of any rift between Sorrell and the rest of the board, noting they stood by him during a series of shareholder revolts over his pay in previous years.
That has left WPP and its peers - the French group Publicis and Interpublic of the U.S. - being buffeted by headwinds which also include the disintermediation of digital platforms such as Facebook. You have given me such excitement and energy and I wanted to thank you for everything you have done and will do for WPP and me.
Analysts believe Sorrell's departure combined with a share price slump of nearly a third over the past year means investors and the WPP board will have to consider that there is potentially more value in breaking up WPP.