"I was forced to defend myself against relentless attacks from self-appointed 'fighters for justice' who sought to depose me from my position, when the ends sanctified all the means," he said. Olmert has consistently denied wrongdoing but pledged to resign if charged with corruption.
Olmert's term was to end in 2010 but he said he would not run in his party's primary election, set for Sept. 17, and would step down afterward "in order to allow the chairman to be elected and form a different government quickly and efficiently." He did not answer questions from reporters.
Olmert's popularity dropped below 20 percent at one point after his bloody but inconclusive war in Lebanon in 2006, and a string of corruption allegations and police interrogations have battered him in recent months. Political analysts here have predicted his resignation for weeks.
Dan Margalit, an Israeli political analyst and longtime friend of Olmert who recently fell from his favor, called the decision to step down "a sad end to a miserable career."
President Bush spoke to Olmert just before he announced his resignation and wished him well, White House spokesman Gordon Johndroe said. He said Bush intends to work closely with Olmert until he leaves office and has appreciated the Israeli leader's friendship, leadership and work for peace.
The State Department said Olmert's departure would not affect U.S. efforts to broker some kind of peace agreement between Israelis and Palestinians by the end of the year.
"The Israelis will work out their own politics," spokesman Sean McCormack told reporters. "We're going to continue working on the basis on which we've worked. We're going to look forward to working with all responsible Israeli leaders in the government, whether it's this government or some future government."
McCormack said there has never been a "perfect moment" for negotiating an end to the conflict and it would be unwise to wait for one.
Olmert, 62, served as Jerusalem mayor for 10 years until 2003, when he was appointed trade minister in former Prime Minister Ariel Sharon's government. He held that position until he became prime minister in 2006 after Sharon suffered a devastating stroke.
His decision not to run in the Kadima Party primary sets in motion a process to choose a new prime minister. Main candidates in his party are Foreign Minister Tzipi Livni and Transport Minister Shaul Mofaz, a former defense minister and military chief of staff.
Polls show Livni with an advantage in the primary. If she were to replace Olmert, she would become Israel's second female prime minister after Golda Meir.
If Olmert's successor as party leader can form a coalition, Israel could have a new government in October. If not, an election campaign could take several months. Olmert would remain in office until a new premier is chosen, heading a caretaker government after he submits his resignation to President Shimon Peres.
Olmert pledged to work for peace "as long as I am in my position," and said that talks with Palestinians and Syria are "closer than ever" to achieving understandings.
But the internal turmoil could make it difficult for Olmert to close deals with either the Palestinians or Syria, agreements that have eluded successive Israeli leaders for decades.
Palestinian Foreign Minister Riad Malki said Olmert's decision would change little.
"It's true that Olmert was enthusiastic about the peace process, and he spoke about this process with great attention, but this process has not achieved any progress or breakthrough," Malki added. He said the Palestinians would deal with any Israeli government.
Olmert spoke as his delegation to indirect talks with Syria returned from their fourth round in Turkey. The two sides set another round with Turkish mediation for August.
