Craig's departure capped a week of turmoil for Republicans, already reeling from ethics problems, with the disclosure of his arrest.
CL "Butch" Otter, the Idaho governor, will pick a successor to complete Craig's term, which runs through next year. He was expected to choose a Republican and maintain the current 51-49 Democratic control of the senate.
Craig, 62, was elected to the senate in 1990. He was arrested on June 11 in the toilet at the Minneapolis-St Paul airport, where police were targeting public sex.
According to a police report, Craig entered a toilet next to an undercover policeman and tapped his foot and waved his hand in gestures that the officer said signalled "a desire to engage in sexual conduct".
He was in the airport on the way to Washington that day.
Craig later said he regretted pleading guilty to the misdemeanor charge and claimed he did nothing wrong.
"I am not gay, I never have been gay," he said on Tuesday, with his wife at his side. They have three children.
Scott Stanzel, a White House spokesman, said George Bush, the US president, telephoned Craig shortly after the resignation announcement, said he knew it was a difficult decision. The president wished the senator well, Stanzel said.
Craig "made the right decision for himself, for his family, his constituents and the United States senate."
|President Bush told Craig that he knew |
it was a difficult decision [Reuters]
Craig had found himself denying allegations that he was homosexual from early on in his Washington career, which began in the House of Representatives in 1981.
At the same time, the conservative senator opposed gay rights and voted in favour of an amendment to the US constitution to define marriage as a union between one man and one woman.
On Saturday, Craig said he felt he should resign from the senate to pursue legal options in the case.
"I have little control over what people choose to believe, but clearing my name is important to me and my family," he said.
Craig saw much of his party abandon him during the week as Republicans sought to distance themselves from the scandal.
Democrats won control of congress in last year's elections partly because of Republican scandals, including bribery and one lawmaker making unwanted advances on teenage Congressional interns.
Republicans have been battered by other scandals this year, including an investigation of senator Ted Stevens of Alaska, the longest-serving Republican in senate history, and by Louisiana senator David Vitter's admission of a "serious sin" after he was linked to an escort service that police described as a prostitution ring.