Defensive coordinator Jim Bates, 58, will coach the team for the rest of the season.
"I decided to step aside to place the focus where it belongs -- on the football team," Wannstedt said.
The Dolphins are off to the worst start in their 39-year history.
The controversy over his status as coach was "becoming a distraction to the team," Wannstedt said.
Sources told the Miami Herald Wannstedt resigned after team owner Wayne Huizenga told him it was a certainty he would be fired at the end of the season.
"Somebody has to accept the responsibility -- the ultimate responsibility," Wannstedt said. "I'm the head coach and it falls on me."
The decision came after a 24-23 loss to Arizona Sunday. The season had started off with the unexpected retirement of running back Ricky Williams.
Wannstedt, 52, has been the Dolphins coach since early 2000. His Miami teams have won 42 games and lost 31, reaching the playoffs twice.
Wannstedt coached the Chicago Bears from 1993 to 1999.