Nasheed, a pro-democracy activist and strong environmentalist who became the first democratically elected president of the Indian Ocean republic in 2008 after three decades of rule by Maumoon Abdul Gayoom, announced his resignation in a televised address from Male.
Nasheed said he did not want to hurt any Maldivian and continuing in office would "only increase [the country's] the problems," making resignation the best option, The Wall Street Journal reported.
Since coming to power, Nasheed has faced a tough time in Parliament, which is dominated by opposition parties.
Vice President Mohammed Waheed Hassan has taken temporary charge of the country, whose main industry is tourism.
The BBC reported Nasheed also faced a mutiny by some police officers, who earlier took control of the state broadcast system.
The Journal quoted government officials as describing the situation as a coup by police officers and opposition demonstrators connected to the former president.
The protesters had been demanding Nasheed's resignation.
The Journal reported initially Nasheed's aides maintained he would stay on but the situation changed after reports of defections from the army as well.
A Nasheed spokesman was quoted by CNN as saying protesters included "some Islamic hardliners" and some police officers mutinied and joined them.
CNN reported Nasheed was under pressure from opposition groups calling for Islam to play a greater role in the country's affairs.
The protests against Nasheed escalated last month with the army's arrest of a senior judge after he had ordered the release of an opposition activist.