In announcing his exit, the 79-year-old Swiss has called an extraordinary Fifa congress “as soon as possible” to elect a new president.
Blatter was re-elected last week, despite seven top Fifa officials being arrested two days before the vote as part of a US prosecution.
But he said: “My mandate does not appear to be supported by everybody.”
He added: “The next ordinary Fifa congress will take place on 13 May, 2016 in Mexico City.
“This would create unnecessary delay and I will urge the executive committee to organise an extraordinary congress for the election of my successor at the earliest opportunity.
“This will need to be done in line with Fifa’s statutes and we must allow enough time for the best candidates to present themselves and to campaign.”
The extraordinary congress is expected to take place between December 2015 and March 2016.
Fifa was rocked last week by the arrests on charges of racketeering, wire fraud and money laundering as part of a US prosecution that also indicted 14 people.
A separate criminal investigation by Swiss authorities into how the 2018 and 2022 World Cups were allocated is also under way.
“I am very much linked to Fifa and its interests. Those interests are dear to me and this is why I am taking this decision,” said Blatter.
“What counts most to me is the institute of Fifa and football around the world.
“I have thoroughly considered and thought about my presidency and the last 40 years in my life.
“These years were closely related to Fifa and the wonderful sport of football. I appreciate and love Fifa more than anything else.
“I only want to do the best for Fifa and my institution. I decided to stand again as the best option for football. The elections are closed but the challenges we face haven’t come to an end.”
The English Football Association has been vociferous in its criticism of Blatter.
“This is great news for football. It should have happened years ago,” FA chairman Greg Dyke told the BBC.
“The timetable doesn’t matter. There has to be a root and branch investigation of Fifa. It has all got to be transparent in the future.”
The latest allegations of corruption against Fifa involved reports claiming general secretary Jerome Valcke was responsible for an alleged $10m (£6m) payment of bribes over South Africa’s bid to host the 2010 World Cup.