Bank of Italy Governor Antonio Fazio resigned on Monday, succumbing to months of intense pressure after he was mired in a bank take-over scandal that has bruised Italy's international image.
The Bank of Italy said in a statement Fazio had decided to stand down in an effort to help the central bank and Italy itself to emerge from the turmoil.
"The decision, made autonomously with a clear conscience, was taken to restore calm, in the greater interest of the country and the Bank of Italy," the statement said.
Fazio's position became untenable after it emerged last week that he was being investigated by Milan prosecutors for suspected insider trading as part of a wider probe into suspected fraud at bank Banca Popolare Italiana.
The news galvanised the government into action and Economy Minister Giulio Tremonti promised to introduce legislation before the end of this week aimed at ousting Fazio if the bank refused to heed calls for his resignation.
Fazio, 69, had headed the Bank of Italy since 1993.
He has been under ferocious scrutiny since July when magistrates started probing allegations he unfairly favoured Pop Italiana in a bid battle against Dutch rival ABN Amro for control of Banca Antonveneta.
He always denied suggestions of wrongdoing and issued numerous statements saying he had never broken the law but was rather acting in Italy's best interests.
Pop Italiana's former CEO Gianpiero Fiorani, a personal friend of Fazio's, was arrested last week on suspicion of embezzlement and market-rigging.
Wiretaps leaked to the press over the summer showed both Fazio and his wife Maria Cristina advising Fiorani over Pop Italiana's bid, which ultimately failed.
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