"I am announcing today that when nominations open for the leadership of the party I shall not now be putting my name forward.
And I am standing down as leader with immediate effect."
Kennedy, arguably Cameron’s first scalp, was under increasing pressure after 25 MPs demanded he resign by Monday.
Sir Menzies Campbell has already confirmed his candidature, with Mark Oaten and Simon Hughes the other frontrunners. Nick Clegg, seen by some as a future star, is among those ruling themselves out.
Pledging his support to his successor, he cautioned about internal problems:
"Now, there are very important elections in front of this party and it is essential in my view that a new, democratically-elected leader is in place as soon as possible to take the party forward.
And that new leader can be assured of my loyal support as a backbench Liberal Democrat MP.
That new leader – and the party – also has some serious internal political issues to address further and to resolve"
Read the full speech here.