"I recognize, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party. I have therefore spoken to His Majesty the King to notify him that I am resigning as leader of the Conservative Party," she said.
Truss accepted that she lost the faith of her party. A leadership election for MPs to select her successor will be "completed within the next week," she added.
Truss is the shortest serving prime minister in British history. George Canning previously held the record, serving 119 days in 1827 when he died.
Appointed on Sept. 6, Truss was forced to sack her finance minister and closest political ally, Kwasi Kwarteng, and abandon almost all her economic program after their plans for vast unfunded tax cuts crashed the pound and British bonds.
Discounting 10 days of mourning for the late Queen Elizabeth II, Truss had only a week before her political program imploded.
"That is the shelf-life of a lettuce," The Economist newspaper commented last week.
As a result, approval ratings for her and her Conservative Party collapsed.
The London stock market and the pound bounced upward on Thursday after Truss announced her resignation. Her policy proposals rocked the markets for weeks.
"Sterling and gilts rallied as the sorry reign of Liz Truss came to an end," said Markets.com analyst Neil Wilson.
This report was compiled with information from Reuters and Agence-France-Presse