"Today, I am relieving myself of the heavy responsibility of Prosecutor General", Chae Dong-Wook said in a statement.
He continued to deny the allegations against him and said he would push ahead with a libel suit against the newspaper that published it last week.
The resignation came yesterday hours after Justice Minister Hwang Kyo-Ahn ordered an investigation into the case.
Opposition parties have suggested the allegations were engineered by the ruling conservative party, after Chae allowed charges to be brought against the former head of the national spy agency and the former Seoul police chief.
"We take note of the fact that calls for Chae's dismissal emerged from the ruling circle when the two accused... Were indicted on charges of breaching election laws", the main opposition Democratic Party said in a statement after Chae stepped down.