Cameron had said on Tuesday that it was "decision time" for the Liberal Democrats about whether to share power with his party or Labour.
Charlie Whelan, a former advisor to Brown, said it was "a sad day" and that there would be no rush to elect a new Labour leader.
Al Jazeera's Alan Fisher said that it was clear that a deal between the Conservatives and Lib Dems had been done.
"Obviously a deal has been done and that is why Brown has resigned. Cameron has said that he wants his ministers to fill positions within hours of him taking office," Fisher said.
William Hague, Conservative party negotiator, said that they have recommendations to take back to party colleagues after talks with Lib Dems.
"I've informed the Queen's private secretary that it is my intention to tender my resignation to the Queen," Brown said in an emotional statement outside Downing Street alongside his wife Sarah.
Liberal Democrat: 57
"In the event that the Queen accepts, I shall advise her to invite the leader of the opposition to seek to form a government.
"I wish the next prime minister well as he makes the important choices for the future."
Brown's two young sons emerged after his comments and then Brown and his wife were driven to Buckingham Palace where he will formally tender his resignation to the queen.
The Conservatives took the most seats in the May 6 election but had failed to secure an outright majority leading to a hung parliament for the past five days.