He submitted his resignation to Deputy Prime Minister and Minister for Foreign Affairs Krishna Bahadur Mahara, sources said on the condition of anonymity.
His resignation will come into effect once it is accepted by the Council of Ministers.
Upadhayay said that he has put in his papers for "returning to social life", Himalayan Times reported.
Upadhayay was appointed during former prime minister Sushil Koirala-led government in April 2015. He was recalled by the subsequent government headed by the CPN-UML's K P Sharma Oli in May, 2016 on charge of working against the country's interest.
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