Sorrell, one of Britain's best-known businessmen, denied any wrongdoing after the allegations surfaced earlier this month, but said he understood the company had to investigate.
The company said Sorrell would be available to assist with the transition, and the man synonymous with the British marketing group told the staff they would come through this hard time. WPP today has 130,000 employees in 112 countries, and a market valuation of around 22 billion pounds, or about $31 billion.
"The succession arrangements look like a sticking plaster and, until strong and credible long-term leadership arrangements emerge, there will be concerns about the sustainability of the WPP Group, as we know it today, and its strategic direction", said Guy Jubb, former global head of governance and stewardship at Standard Life Investments, an investor in WPP. "It has been a passion, focus and source of energy for so long", stated Sorrell in an emotional note to WPP staff.
Sorrell is one of the UK's best-paid business leaders, earning more than £200m from pay and lucrative - and highly controversial - reward schemes in the past five years alone.More news: Gianluigi Buffon won't back down over Michael Oliver comments
WPP plans to announce that Mark Read, the chief executive of Wunderman, an agency network it owns, and Andrew Scott, chief operating officer of the group's European business, will take over as interim joint chief operating officers.
He worked closely with the brothers Saatchi (Charles and Maurice) and helped fashion its rapid growth, before going solo and acquiring a shopping basket manufacturer Wires & Plastic Products (WPP).
He said that he leaves the company in "very good hands", with Read, Scott and the management team at all levels having the knowledge and abilities to take WPP to "even greater heights, as well as capitalise on the geographic and functional opportunities".
That has left WPP and its peers - the French group Publicis and Interpublic of the USA - being buffeted by headwinds which also include the disintermediation of digital platforms such as Facebook.
"If WPP does well, I do well", he told the Press Association in April 2016.More news: First Rohingya family returns to Myanmar after conflicts
Roberto Quarta, the chairman, and Nicole Seligman, senior non-executive director and an experienced corporate lawyer, set up a board sub-committee to examine the claims through a formal process.
He added: "We have weathered hard storms in the past".
Said he: "I shall miss all of you greatly".
Analysts believe Sorrell's departure combined with a share price slump of nearly a third over the past year means investors and the WPP board will have to consider that there is potentially more value in breaking up WPP.More news: Commonwealth Games: 'Ronaldo' spotted on bowling green