Ernst von Freyberg, a German businessman who was named bank president in February by Pope Benedict XVI, will temporarily replace Paolo Cipriani as director of the Institute for Religious Works, the bank's official name, the Italian news agency ANSA reported.
Cipriani's deputy, Massimo Tulli, also resigned.
The Vatican released a brief statement saying Cipriani and Tulli believed their departures would be in the bank's "best interest."
Monsignor Nunzio Scarano, suspended last month as head of analytic accounts at the Vatican's asset-management agency, was arrested Friday on suspicion of attempting to evade customs controls. Giovanni Maria Zito, an agent in Italy's domestic intelligence agency, and financial broker Giovanni Carenzio were also arrested.
The bank, also known by its Italian acronym, IOR, was in the past suspected of being involved in laundering drug profits for a U.S. crime family. Cipriani was investigated in 2010 with former bank President Ettore Gotti Tedeschi on suspicion of money laundering.
Benedict named von Freyberg president of the IOR as one of his last acts before his retirement. Von Freyberg has pledged to be more open about the institution's operations.