At a White House ceremony, President Barack Obama has praised the outgoing Secretary of Defense as "exemplary," thanking him for the job he has done.
"When I asked Chuck to serve as the Secretary of Defense, we were entering a significant period of transition. The drawdown in Afghanistan, the need to prepare our forces for future missions, and tough fiscal choices to keep our military strong and ready."
In making the announcement, the President has revealed the two agreed at the end of last month that Hagel would leave his position.
Hagel, a former Republican Senator, says he plans to remain in the post until a replacement can be confirmed.
"As I said, and as the President noted, I will stay on this job and work just as hard as I have in the last couple of years everyday, every moment until my successor is confirmed by the Unites States Senate."
Hagel's former Republican caucus colleague, John McCain, a vocal opponent of Hagel's initial nomination in 2013, is suggesting there is more than meets the eye to the Defense Secretary's departure.
Speaking to a radio station in his home state of Arizona shortly after the White House announcement, McCain has suggested Hagel is leaving the post amid frustration over being left out of the inner-circle inside the White House.
Washington insiders note Hagel and McCain were often at-odds with one-another while in the Senate together.
A number of names are already being floated around as potential candidates to replace Hagel.
They include former under-secretary of Defense Michele Flournoy.
If nominated and confirmed by the Senate, she would become the first woman to lead the Pentagon.
Republican House speaker John Boehner has released a statement, saying the personnel change must be part of a larger re-thinking of the U.S. strategy to confront the threats the country faces abroad, especially the threat posed by the rise of the Islamic State in Syria and Iraq.
