The manipulation of interest rate has attracted a lot of criticism from the government as well as the regulators, which according to Diamond is "damaging the franchise" of the bank.
Barclays said in a statement, "The search for a new chief executive will commence immediately and will consider both internal and external candidates."
Diamond has also been summoned by the MPs on the Treasury Committee to answer questions about the Libor affair.
The Chief Secretary to the Treasury, Danny Alexander said, "There are many questions to be answered about the rate fixing and Barclays will have to answer many of those questions."
Barclays (BARC) chairman Marcus Agius, who has also submitted his resignation, said, "Bob Diamond has made an enormous contribution to Barclays over the last 16 years of distinguished service to the Group, building Barclays Investment Bank into one of the leading global investment banks in the world."
The London rate and the related European interbank offered rate are widely used in the US, the UK and other nations to impact large volumes over $500 trillion of swaps and futures contracts, commercial and personal consumer loans, home mortgages and other transactions.
