Zhelyazkov's dramatic move came ahead of a vote of no confidence in parliament, and 20 days before Bulgaria joins the euro. BBC rwported.
Protesters had accused his minority centre-right government, in power since January, of widespread corruption. The government had already scrapped a controversial budget plan for next year in response to the demonstrations last week.
"We hear the voice of citizens protesting against the government," Zhelyazkov said in a TV address.
Both young and old have raised their voices for [our resignation]," he added. "This civic energy must be supported and encouraged." A statement on the government website said ministers would continue in their roles until a new cabinet was elected.
Between 50,000 and 100,000 people turned out in Sofia's central Triangle of Power and Independence Square on Wednesday evening calling for the government to go. The words "Resignation" and "Mafia Out" were projected onto the parliament building.
They were backed last week by President Rumen Radev who had also called on the government to stand down.
