The video showing Corneliu Barladeanu, bishop of the eastern city of Husi, which has been circulating online since mid-July, has created a scandal in Romania, where 85 percent of the population are Orthodox Christians.
The Holy Synod, the Church's ruling body, met on Thursday and Friday to discuss the matter.
After the two day discussion, the bishop -- who claims he is innocent -- decided to resign "for the peace and the good of the Church," the Romanian church leadership said in a statement.
The bishop will no longer have an official position within the Church but will remain a monk, but without the power to celebrate mass.
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The affair comes a few weeks after a previous scandal rocked Romania's Orthodox Church.
A priest from the northwest of the country, suspected of attempted sexual "corruption" involving a 17-year-old youth, was thrown out of the Church at the end of July.
He is facing legal action for soliciting minors for sexual purposes.
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