Prime minister Boris Johnson will stand down after speaking to the 1922 Committee chairman Sir Graham Brady.
A new Tory leader is set to be in place by the party conference in October, a No 10 source said.
Former financial secretary to the Treasury Jesse Norman confirmed the news on social media, saying “PM has quit”.
Deputy PM Dominic Raab will take the reins until a new leader is elected.
According to the latest odds, Rishi Sunak remains joint favourite to succeed Johnson as leader of the Conservatives.
Sky Bet will pay out £4 for every £1 placed on either Sunak or Trade Minister Penny Mordaunt to be the next Tory leader.
Mordaunt is viewed in the party as having strong pro-Brexit credentials, charisma and good leadership qualities.
Defence Secretary Ben Wallace, Foreign Secretary Liz Truss, and new Chancellor of the Exchequer Nadhim Zahawi make up the rest of Sky Bet’s top five contenders to replace Johnson.
Reaction on social media has been quick to roll in.
Here’s a flavour of what people are saying:
