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This is in breach of the Australian constitution that demands a person who is a citizen of a foreign power is incapable of being chosen as a senator or member of the House of Representatives in Australia, Xinhua news agency reported.
Ludlam, who was born in New Zealand and moved to Australia when he was nine-year-old, said he had assumed that as he became a naturalised Australian citizen when he was in his "mid-teens", his previous citizenship was not an issue.
"Recently it was brought to my attention that I hold dual citizenship of Australia and New Zealand, I am therefore ineligible to hold elected office in Parliament," Ludlam said.
"I apologise unreservedly for this mistake. This was my error, something I should have checked when I first nominated for pre-selection in 2006. I have no wish to draw out the uncertainty or create a lengthy legal dispute, particularly when the Constitution is so clear."
Ludlam, who is incredibly popular with the younger generation in Australia, particularly millennials, was one of the most active politicians on social media in Australia.
He recently took time away from the Senate in late 2016 to deal with a widely-publicised struggle with depression and anxiety, drawing waves of support form fellow parliamentarians and the general public.
The leader of the Australian Greens, Senator Richard Di Natale, said he was "absolutely devastated" by the announcement.
"Scott's decision to deal with this issue directly and immediately shows his absolute integrity and character," Di Natale said.
"As a colleague, Scott has been an outstanding member of Parliament and of the Greens. He has been a strong representative for the people of WA and the nation on a range of issues from the anti-nukes movement, digital rights, housing and homelessness and so many others. As a friend, one could not ask for anything more."
Asked what he plans to do next, Ludlam said: "I will find some other way of stirring up trouble."
Ludlam served as the co-deputy leader of the party and handled a broad portfolio, including communications, defence, foreign affairs and sustainable cities.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)