Rao sent his resignation to Prime Minister Manmohan Singh, sources close to the minister said. He, however, has not yet taken a decision on whether to quit the Congress.
He is reportedly planning to join the Bharatiya Janata Party (BJP). The MP from Eluru in West Godavari district was inducted into the union cabinet in June last year.
After the bill for formation of separate Telangana state was passed in the parliament in February, Rao had reportedly decided to quit the Congress and join the Telugu Desam Party (TDP). However, the TDP leaders in West Godavari district opposed his admission into the party.
Rao has three decade old association with the Congress. He was first elected to Lok Sabha in 1984. He was again elected in 1989, 1998, 2004 and 2009.
He is the second central minister to quit over the state's bifurcation. Last month, D. Purandeswari had resigned as the minister and also quit the Congress. She joined the BJP.