He handed in his resignation this evening after senior members of the ruling Social Democrats (PSD) voted to withdraw their support at a leadership meeting.
"I am leaving with my head held high. I'm going to get my things at parliament," Tudose told journalists after handing in his resignation at the party meeting.
The move heralds fresh turmoil for Romania, one of the European Union's poorest countries, and comes on the eve of a historic visit by Japanese Prime Minister Shinzo Abe.
In June, the party filed a no-confidence motion in then- prime minister Sorin Grindeanu, after he fell out with powerful PSD boss Liviu Dragnea, 55.
Dragnea, who is barred from running for office because of a fraud conviction, is widely acknowledged to pull the strings behind the scenes.
The party chief nominated former economy minister Tudose as Grindeanu's successor, but their relationship also turned into an increasingly bitter sparring match in recent months.
Tudose's resignation will have to be signed off by centre-right President Klaus Iohannis. He also needs to approve the PSD's new prime ministerial nominee, to be chosen at a party meeting tomorrow.
It is the third major crisis to hit the party since it rode back into power in December 2016, barely a year after being forced from office over a deadly nightclub blaze blamed on corruption.
In February, Romania's largest protests since the fall of communism forced the government to drop a bill aimed at watering down anti-corruption laws that critics said would have helped Dragnea himself.
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