Just three weeks after Henry was named the People's Choice at the Qantas media awards, TVNZ chief executive Rick Ellis accepted his resignation at a meeting today.
Earlier in the week Henry had been suspended without pay after asking the Prime Minister whether Governor General Sir Anand Satyanand was "even a New Zealander".
The situation escalated when reports emerged of Henry laughing at the name of Delhi chief minister Sheila Dikshit.
Ellis said the impact on New Zealand's reputation and the relationship between New Zealand and India had reached a crescendo and he commended Henry's decision to resign.
Henry has again apologised for his comments and said it was no longer practical for him to do the job he has "so loved doing". Read Paul Henry's full statement .
"I am astonished and dismayed that my comments have created a diplomatic incident," Henry said. "I walk the finest of lines and accept that I have inadvertently crossed it from time to time."
Henry has had support from thousands of New Zealanders since the scandal broke, and said he is saddened to know that TVNZ has had to suffer the consequences of his actions.
"I do not want to be the lightning rod for racial disharmony in this country," he said.
Ellis has apologised to the Indian community in New Zealand and India, and said he will be apologising to the Governor General in person. Read Rick Ellis' full statement.
"The reality is that his (Henry's) comments have split the community and damaged New Zealand's international relationships," Ellis said.
"Any suggestion of racism, whether intended or not, is unacceptable."
Ellis acknowledged that thousands of New Zealanders will be disappointed at the outcome, but said the issue has generated a divisive debate and there is no going back from that.
Prime Minister John Key told NZPA that Henry's resignation has brought "closure" to a "sad and regrettable" episode.