Union minister Harish Rawat is likely to replace Bahuguna. He admitted that he took this step as his party wanted him to resign.
The party had earlier changed the state presidents of Rajasthan and Madhya Pradesh.
Earlier, Bahauguna earned a lot of flak for his poor handling of the relief work undertaken by his government after the natural calamity that wreaked havoc in large parts of Tehri district. His leadership skills have since then been questioned, reported media.
In the 2012 polls, the Congress won 32 seats in the 70-member assembly, and was only marginally ahead of the BJP, which won a seat less.
The Congress government in the state has the backing of three BSP lawmakers and the lone Uttarakhand Kranti Dal legislator. Three independent legislators too have offered their support to the Congress government.
Uttarakhand sends five members to the Lok Sabha, and the party had made a clean sweep in 2009. The BJP had drawn a blank.