Kezia Dugdale was first elected to Holyrood in 2011, after working for the former Labour MSP Lord Foulkes.
And she replaced Jim Murphy as Scottish Labour leader in August 2015, after the party lost all but one of its Westminster seats in Scotland to the SNP.
But after two years in the role, she claims it is now time for someone else to take on the challenge.
The Lothians MSP is understood to be citing the pressures of leadership and wanting to enjoy her life outside the spotlight for her shock departure.
Ms Dugdale, who is leaving with immediate effect, said she had devoted “every waking moment of my life” to improving Labour support in Scotland.
She added: “I have thought long and hard about this. I care deeply about the Labour Party – I love it and I have devoted my adult life to serving it in a number of different capacities.
“And I have just come to the conclusion that the best thing for it, the Labour Party, this precious, precious thing that has done so much good in our country, and indeed for me, is to pass that baton on.”
She also insisted she was leaving the party in a much better state than she had found it.
But she said it was “time to pass on the baton” – sparking speculation over who could take on the role.
Neil Findlay, who is seen as Jeremy Corbyn’s man in Scotland, is hotly tipped as a contender for her replacement.
Richard Leonard, Anas Sarwar, Jackie Baillie, Jenny Marra and James Kelly have also been raised as contenders for the role.
Ms Dugdale’s resignation takes immediate effect so her deputy Alex Rowley will serve as acting leader – unless he decides to resign from his post to contest the leadership himself.
In her resignation letter, Ms Dugdale also referred to the death of her close friend Gordon Aikman, 31, after a battle with Motor Neurone Disease.
She said his example taught her “how precious and short life was and never to waste a moment.”
Ms Dugdale has previously been fiercely critical of UK Labour leader Jeremy Corbyn, and has faced criticism from left-wing members of her own party.
But today she insisited Mr Corbyn has her full support, and that she expects him to become prime minister.
She said: “On a personal level we continue get on extremely well, and I wish him every success for the future”.
Labour Party leader Jeremy Corbyn said: “I’d like to thank Kezia Dugdale for her work as Scottish Labour leader and the important role she has played in rebuilding the party in Scotland.
“Kezia became Scottish leader at one of the most difficult times in the history of the Scottish Labour Party, and the party’s revival is now fully under way, with six new MPs and many more to come.
“I want to thank Kez for her tireless service to our party and movement, and look forward to campaigning with her in future for a country that works for the many not the few.”