"I have decided to leave the party today because I don't have the strength and courage to bear any more disappointments and betrayals," said 60-year-old Hussain, who is living in self-exile in London since 1991.
"The central committee is now free to choose anyone they want to head the party," he said early this morning.
Soon after his announcement, hundreds of party supporters gathered at the MQM headquarters in Karachi and in other parts of the Sindh province shouting slogans in favour of Hussain and urging him to change his decision.
The central committee, which has been the target of criticism in recent weeks by Hussain, held an emergency meeting with senior leaders saying they would convince him to reverse his decision.
"No one but Altaf Hussain can lead this party. I know we have made mistakes but we ask for his forgiveness," MNA and senior leader Dr Farooq Sattar said. Hours later, Hussian withdrew his resignation, saying it was last time to accept the demand of workers.
In a telephonic address to his supporters outside MQM headquarters, Hussain said: "Once again, I'm agreeing to my supporters' wishes."
Last year, he had announced his resignation, only to withdraw his decision after a few hours, on the insistence of party workers. The MQM, which is the single largest party in Karachi and also the most influential with the power to shut down the city in minutes, was formed in 1984-85 by Hussain when he was a student leader in the Karachi University.
Hussain and a loyal band of followers had formed the Mohajir Qaumi Movement and won widespread support from the Urdu speaking population which migrated to Pakistan from India during 1947 partition.
Hussain was also unhappy with the accusations made by the Paramilitary Rangers about his party workers being involved in sectarian violence and killings in Karachi and termed it a conspiracy against the MQM. His charismatic and immense power over the Urdu speaking population in Karachi and Sindh was evident earlier this year when he was arrested by the British Metropolitan police in London in a money laundering case.
Just an hour after his arrest was announced Karachi came to a standstill and remained shut for three days before the MQM appealed to the people to resume normal business and work.