But who are the contenders to replace him as leader of a party that won 12% of the vote in the last general election?
The 48-year-old barrister is a rising star in the party, holding the high-profile immigration and financial affairs brief, and one of UKIP's most accomplished media performers.
Announcing his leadership bid, he promised to tackle social mobility by backing 50 new grammar schools in deprived areas of the UK and to chase Labour's vote "ruthlessly."
Thought to be Nigel Farage's favoured successor, he dismissed as "absolute nonsense" suggestions that his leadership bid could be derailed amid reports that his UKIP membership lapsed between the end of 2014 and early 2016 - party rules require candidates to have been members for two years.
Born in Manchester, with African-American, Jewish and Irish Catholic roots, he is also head of the party's Black and Minority Ethnic (BME) association.
After being called to the bar, he practised in criminal law before moving into commercial practice, advising hedge funds and other City businesses on regulatory issues.
He joined UKIP in 2010 and was elected as MEP for North West England in 2014.
He contested the Stockport constituency in the 2015 general election, where he came third despite boosting the UKIP vote by 10%.
Although not a well-known figure in Westminster circles, Lisa Duffy has won the backing of key modernising figures in the party such as Suzanne Evans and Patrick O'Flynn.
Ms Duffy is a town and district councillor in Cambridgeshire, a former mayor of the town of Ramsey and as campaigns director, played a key role in fighting by-elections.
At her campaign launch, Ms Duffy, 48, a mother of six and former retail manager, pitched herself as the "grassroots candidate" who would "walk the People's Army into Westminster".
Chief of staff to MEP Mr O'Flynn, she joined UKIP in 2004 and stood unsuccessfully against Labour's Hazel Blears in Salford in the 2005 general election.
She said the party needed to widen its appeal to win seats in 2020 but also continue to tackle "taboo subjects" such as the impact of immigration on British communities and the need for a positive vision for "modernised British Islam".
The North East UKIP MEP has thrown his hat into the leadership race, saying he wants to be a "strong and credible voice for the North East".
The 35-year-old was elected to the European Parliament in 2014 and is a former general secretary of the party.
Announcing his candidacy, he said he wanted to appeal to the millions of voters who did not support UKIP in last year's general election, but backed Brexit in the EU referendum.
He warned that the elevation of Theresa May to the premiership meant that "negotiations for the UK's withdrawal from the EU will be in the hands of those who do not actually want us to leave".
The MEP for the West Midlands, and Dudley councillor, has said UKIP should stick by its "core principles and values" and not be "distracted by negative influences".
The 46-year old was a Conservative activist before joining in 2011.
He has called for major reform of the penal system, including restricting prisoners' privileges, banning visits during the first six months of a sentence and an automatic 10-year increase in sentence for anyone attacking a prison officer.
He also backs far-reaching changes to the tax system, including a 50% cut in alcohol and tobacco duty, replacing VAT with a local sales tax and gradually merging national insurance and income taxes.
The 56-year-old former businesswomen and healthcare professional is one of the party's most fluent and reliable media performers.
She came within fewer than 2,000 votes of becoming UKIP's first elected MP when she narrowly lost the 2013 Eastleigh by-election to the Lib Dems, impressing journalists with her performance - which relegated the Conservatives into third place.
She went on to be elected to the European Parliament as MEP for the South of England in 2014, although she decided against standing in the 2015 general election for personal reasons.
As deputy chair and home affairs and justice spokeswoman, she has maintained a high profile, although it remains to be seen whether she has the experience and breadth of appeal to prevail in what is likely to be a fierce contest.
The party's culture spokesman and London Assembly member had said he was thinking about running but has thrown his weight behind Steven Woolfe.
Mr Whitlle, a born and bred Londoner who worked in journalism, before setting up the New Culture Forum think tank impressed many with his performance in the London mayoral contest earlier this year, despite coming fifth.
Mr Whittle, the party's most prominent gay representative, has said there is a "great opportunity" for the party to eat into the Labour vote in the north of England, appealing to people who have been "largely forgotten".
The 51-year-old former Conservative councillor, who defected to UKIP in 2013, is currently suspended from the party until September following an internal dispute.
A former BBC journalist and public relations executive, Ms Evans has been credited with presenting a softer, less abrasive side to the party as well as formulating its 2015 election manifesto. But she is also mistrusted by sections of the party.
After being touted by Nigel Farage as his preferred successor last year, she subsequently left the roles of head of policy and deputy chair following a bout of bitter infighting, and her suspension meant she was not able to stand for the London Assembly.
She announced at a Westminster press conference that she had "given up hope" of being allowed to stand in the leadership contest as a result of the suspension. She has decided to endorse Lisa Duffy, a UKIP councillor.
The Clacton MP is the party's best-known figure aside from Nigel Farage but has apparently ruled himself out of the contest. He would have been unable to stand under the minimum two-year membership rule.
The former Conservative defected to UKIP in 2014 and subsequently won a by-election, becoming the first UKIP MP to be elected to Parliament.
But his relationship with Mr Farage quickly soured, and the two have been locked in a state of open warfare ever since.
Mr Carswell, whose actions have been discussed by the party's National Executive Committee, has regularly called for fresh leadership in the party and posted a smiley-faced emoji on his Twitter feed when news of Mr Farage's resignation came.
The MP, a long-time campaigner for political reform, has warned UKIP against strident "nativism" and says it needs to offer optimistic solutions to the economic problems highlighted by the EU referendum vote rather than "playing on public anger".
Described by Nigel Farage as the best deputy leader of any political party in the UK, Paul Nuttall is a key power broker within UKIP.
Although viewed as one of the favourites to succeed Mr Farage, the North West England MEP has ruled himself out of the race saying he had achieved his objective of getting the UK out of the EU.
He also said he would resign as deputy leader at the party's next national conference but that he would stay on as an MEP to "hold the government's feet to the fire" during Brexit talks.
The Bootle-born 39-year old has been leading the party's charge in the north of England, which has seen it push Labour close in a number of by-elections and help win over Labour-supporting areas to the Leave side in the EU referendum.
A keen Liverpool fan who played for Tranmere Rovers' youth team, he was at Hillsborough on the day of the 1989 tragedy.
The former Press Association and Daily Express journalist was brought in as the party's head of communications in 2013 and became one of Mr Farage's chief lieutenants as well as being elected an MEP in 2014.
But the pair had a big fallout after the 2015 election, when Mr O'Flynn questioned Mr Farage's reversal of his decision to resign, suggesting it damaged trust in the party and made UKIP look like a personality cult.
The infighting led to him losing his position as economics spokesman.
Mr O'Flynn has now his weight behind Lisa Duffy.
When UKIP last held a formal leadership contest in 2010, there were four candidates - two of whom have since left the party.
Are there any other names that could join this year's field at the last minute?
Mark Reckless, Neil Hamilton, Raheem Kassam and Arron Banks are all big figures in the party whose claims have been variously touted.
The first two were elected members of the Welsh Parliament in May, which could be an obstacle to them coming forward. However, they both have years of experience in Parliament, albeit mainly as Tory MPs, under their belts.
Mr Reckless is a close ally of Mr Carswell, and the party's economics spokesman, while Mr Hamilton is leader of the party's group in the Welsh Parliament, although may be regarded as having too much political baggage to be a realistic contender.
Raheem Kassam, a former aide to Mr Farage who left during last year's post-election bloodletting and is now editor in chief of Breitbart London, has also said he is not ruling out getting involved.
Mr Banks is perhaps the most intriguing name in the frame. He is one of UKIP's main donors, helping bankroll the campaign to leave the EU, but his relations with some others in the party - particularly Mr Carswell - have been strained.
Nigel Farage is standing down as leader of UKIP, saying he wants "his life back" after helping to secure a Leave vote in the EU referendum.