The man who helped end the Cold War was forced to step down after weeks of angry protests.
He handed over power to former parliament speaker Nino Burjanadze in a dramatic climax to mounting popular unrest after an allegedly rigged 2 November parliamentary poll that tapped into widespread dissatisfaction with his rule.
As thousands of protestors shouted, cheered and danced and cars honked their horns in a deafening barrage of noise to celebrate the news, Shevardnadze announced he was bowing to popular will.
"I am leaving," he said in televised comments after meeting with the leaders of the opposition in this former Soviet republic.
"I have never betrayed my people and that's why I think that as president, I should submit my resignation," Shevardnadze said.
Just before, inside his residence outside Tbilisi where he had agreed to resign after meeting the opposition leaders along with Russian Foreign Minister Igor Ivanov, the former president cut a lonely figure.
Asked by reporters who he was handing power over to, the 75-year-old Shevardnadze, who was once the darling of the West, replied: "That is no longer any of my concern."
But he denied suggestions he would be forced into exile, saying he would go home and write his memoirs.
Outside the parliament, there were chaotic scenes as a surging crowd chanted, "He has gone," "He has gone," waving the red and white flags of the opposition.
Shouts of jubilation rang out as opposition leader Mikhail Saakashvili, who orchestrated the protests, told demonstrators their grandchildren would remember the day they toppled Shevardnadze.
Georgian opposition leader Saakashvili (L), and caretaker president Burjanadze
"Today is the greatest day in the history of Georgia, this is the day of the birth of a new Georgia," the 35-year-old US-educated lawyer shouted through a megaphone, as he stood in the thick of the crowd.
"Let us be proud of our country, your children, grandchildren will be very proud of this very important day in the history of Georgia. The revolution has happened, without casualties, without bloodshed," he said.
Fresh presidential elections in the tiny Caucasus nation are to be held in the next 45 days under the Georgian constitution, senior opposition figure Zurab Zhvaniya, a former speaker of parliament, said.
Saakashvili, a potential new leader of Georgia, praised the outgoing president for agreeing to step down peacefully. "He has taken a manly step by leaving office without spilling any blood," he said.
The opposition has charged that the parliamentary elections which returned Shevardnadze's government to power were rigged, and alleged that the president had allowed corruption to flourish unchecked.
The European Union and the Russian and US governments coordinated international efforts to end the political crisis in Georgia peacefully, as the Russian foreign minister shuttled between Shevardnadze and the opposition on Sunday.
Georgia, which is of vital strategic interest to the West as a transit route for oil from the new fields of the Caspian Sea, was buffeted by civil war fought out on the cobbled streets of Tbilisi more than a decade ago.
But the demonstrations this time were peaceful, giving rise to comparisons with the "velvet revolution" which saw the peaceful overthrow of communism in Czechoslovakia in 1989.