Morales, 60, has been Bolivia's president for nearly 14 years and is the longest-serving leader in Latin America.
"I regret this deeply," Morales said late Sunday afternoon on national television.
Morales said he will send his resignation letter to Congress in the next few hours. Other government officials also resigned.
Earlier in the day he called for a new election "to preserve the new Bolivia, life and democracy."
And in other developments Sunday, the Organization of American States issued a report on irregularities in last month's election and the military commander urged him to resign
At least three people have died and more than 300 people have been injured in clashes between anti-government protesters and Morales supporters since the election on Oct. 20. The term is five years.
During an earlier nationally televised news conference, Morales said he would also replace members of the country's election board.
The country's election board had an unexplained 24-hour halt in the vote count with 83 percent of the results counted and the president ahead by 7 percentage point but need 10 percentage points to avoid a runoff. When it resumed, it showed a shift in favor of Morales.
The Organization of American States found it was "statistically improbable that Morales had obtained the 10 percent difference to avoid a second round."
"The manipulations to the computer system are of such magnitude that they must be deeply investigated by the Bolivian state to get to the bottom of it and assign responsibility in this serious case," said the Organization of American States, which recommended a new election.
Williams Kaliman, the commander of the country's armed forces, told reporters Sunday that Morales should resign to restore "peace and stability and for the good of our Bolivia."
Police officers have joined several thousand people in anti-government protests in La Paz, Sucre, Santa Cruz and Cochabamba.
Some police guards abandoned their posts at the presidential palace in the capital La Paz.
Carlos Mesa, runnerup in the October election, said Morales and his vice president Alvaro García Linares should be disqualified from running in the next election.
Most TV and radio stations are controlled or support the government.
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