Republican Michael Grimm, a former FBI agent who represents parts of New York's Staten Island and Brooklyn, was re-elected to office in November despite facing indictment on criminal charges.
Grimm, 44, said in a statement that his resignation would be effective January 5, the day before Congress reconvenes.
"I do not believe that I can continue to be 100 per cent effective in the next Congress, and therefore, out of respect for the office and the people I so proudly represent, it is time for me to start the next chapter of my life," Grimm said.
The charge is linked to his conduct while owner of a Manhattan health food restaurant before he became a member of the House of Representatives in early 2011.
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House Speaker John Boehner said Grimm had made an "honorable" decision in stepping down.
In a 20-count indictment in April, prosecutors accused Grimm of paying employees with envelopes of cash and of lying under oath about his responsibility for handling payroll.
He pleaded not guilty at the time, insisting he was the target of a political witch hunt and said he would fight tooth and nail until he was exonerated, but changed his mind after discussion with Boehner Monday.
The congressman made headlines in January after being caught on camera threatening to throw a reporter off a balcony after the journalist asked Grimm about the investigation.
By pleading guilty to the count, Grimm is hoping to avoid time in jail. He initially faced up to 20 years in prison.
His sentencing is set for June 8.