Hagel, Obama's third defence secretary, submitted his resignation today morning after "several weeks" of discussions, officials said.
He has agreed to serve till his replacement is confirmed by the Senate.
The news of Hagel's stepping down was first reported by The New York Times, according to which Obama is dissatisfied with him in view of the several global crises particularly rise of the IS.
A Republican and Vietnam war veteran who was critical of the Iraq war, Hagel came to the Pentagon to manage the Afghanistan drawdown and the shrinking Pentagon budget in the era of budget sequestration.
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Hagel was planning to call his new Indian counterpart this week.
The two had not been able to talk ever since Manohar Parikkar was sworn-in as the defence minister due to scheduling conflict.
Hagel was among the three Cabinet-level officials of the Obama Administration to have travelled to India in the first 100 days of the Modi Government.
A formal announcement in this regard is expected soon by Obama.