Stephen, a former Olympic weightlifter who had been in power since December 2007, has been replaced by Freddie Pitcher, a former minister of commerce, industry and environment.
The move came after opposition member David Adeang last month used parliamentary privilege to read out what he said was correspondence between Stephen and a phosphate dealer in Thailand.
Stephen allegedly asked in an email for a kickback on the sale of 25,000 cubic tonnes of the mineral.
Adeang last week tabled a motion of no confidence against Stephen which was due to be heard Thursday, but the president resigned instead.
Stephen said the email was "taken out of context" but he was calling it quits so the government could "get on with its real work" without further distractions.
"It has been an honour to serve as president of Nauru for the past four years, during which time I have been proud of the vast number of reforms and lifestyle improvements we`ve achieved for our people during that time," he said in a statement.
"To resign was a common sense decision based on the fact that while there were unwarranted and mischievous attacks being made against me by the opposition, the office of the president was being devalued.
"It was becoming a distraction and I strongly believe the best way to remove that distraction was to pass over the reins to another member of the governing group so we could get on with the job we are elected to do."
Adeang said Stephen "has done the honourable thing to resign but we would have thought it would have been more honourable if he had resigned earlier," he was quoted as saying by the Sydney Morning Herald.
Nauru is one of the smallest nations in the world with less than 10,000 residents. (*)
Editor: Kunto Wibisono
Copyright © ANTARA 2011
