Krishna Bahadur Mahara's resignation follows a meeting of the Nepal Communist Party (NCP) that asked him to step down as the Speaker and member of Parliament, a day after the woman alleged that the politician assaulted her at her rented apartment.
"In the wake of media reports questioning my moral character, I am resigning on the moral ground to facilitate an impartial and fair investigation into the allegations," read Mahara's resignation letter, according to the Kathmandu Post.
Mahara one of the country's leading Communist Party leaders however, said in the letter that he has resigned until the investigation is completed.
He had initially denied the allegation, calling it an attempt to "assassinate his character".
Mahara was elected speaker of the House of Representative in 2018 after the Communist Party of Nepal won majority of the seats in elections in November 2017.
Narayan Kaji Shrestha, a spokesperson of the ruling party, told Efe news that Mahara was asked to resign for an independent and unbiased investigation.
The allegation surfaced on Monday after the victim a staffer at the Parliament secretariat claimed that Mahara came to her house intoxicated on Sunday evening and raped her while her husband was away.
The allegation was made in a video released by the online news portal Hamro Kura. The woman said she had known Mahara for years and that he had behaved indecently with her in the past as well.
Mahara was an influential Maoist leader during the 10-year-long civil war that started in 1996. The Maoists entered into a UN-monitored peace accord in 2006 and joined mainstream politics, ending their armed revolt.
He has previously served as Deputy Prime Minister, Information Minister and Home Minister.
( With inputs from IANS )