Johann Lamont has quit as leader of the Scottish Labour Party after accusing the UK party leadership of treating Scotland as a "branch office".
A Scottish party source said Ms Lamont had "had enough" and felt she did not have the support of the UK party.
She also voiced anger at the removal of a senior Scottish party official.
Former Labour first minister in Scotland, Henry McLeish, told the BBC that the resignation was evidence of Labour in crisis.
Speaking to BBC Radio Scotland's Good Morning Scotland programme, he said: "This crisis in Labour didn't happen yesterday - this has been a decade now of decline.
"We've seen that they [Labour] have failed to match the other parties in terms of devolution commission reports and of course we have had this suffocating control of Westminster during this period. And this leads to the need for a very different modern Labour Party as we go ahead."
BBC correspondents said Labour's tally of 41 Scottish MPs might be at risk from a strong SNP challenge at next year's general election.
Ms Lamont also described some Labour MPs as "dinosaurs" who failed to recognise that "Scotland has changed forever" after September's referendum.
BBC Scotland understands that Ms Lamont, who was elected leader in December 2011, has been unhappy for some time about the direction of party strategy.
More autonomyShe is said to have become disillusioned with internal criticism of her leadership and interference by the UK Labour party in the running of Scottish Labour.
Ms Lamont wanted more autonomy for the party in Scotland and significant new powers for the Scottish Parliament.
But she felt both of those objectives were being thwarted by some of her Westminster colleagues, and accused them of putting their own interests ahead of those of Scotland.
She was also unhappy that a senior official of the Scottish party - general secretary Ian Price - was to be removed from office without her being consulted.
BBC Scotland correspondent James Cook said the removal of Mr Price appears to have been the "final straw".
Our correspondent added that Ms Lamont's resignation also highlights the potential harm the Scottish political situation could do to UK Labour Party leader Ed Miliband's prospects of becoming prime minister.
Ms Lamont's deputy, Anas Sarwar MP, will take over the leadership on a temporary basis. An MSP will also be chosen to stand in for Ms Lamont at Holyrood until a successor is elected.
Whoever replaces Ms Lamont will become Scottish Labour's seventh leader since the Scottish Parliament was established 15 years ago.
Analysis Iain Watson BBC News political correspondentEd Miliband was given very little notice of Johann Lamont's decision to quit. He didn't try to talk her out of it.
In recent weeks, she had been pressing for more autonomy for the Labour party in Scotland and for the Scottish leader to have more power over MPs at Westminster.
Although the SNP had been defeated in the referendum, they were resurgent in the polls and some of Ms Lamont's colleagues felt she had gone "missing in action" during the campaign.
There had already been talk of trying to persuade a more high profile personality to take over - former Scottish Secretary Jim Murphy was being openly talked about.
Scotland is vital to Ed Miliband's chances of forming a majority at Westminster in 2015.
In a tight contest, he might need all of his current tally of Scottish MPs to do so - yet the SNP is now mounting a formidable challenge.
Ed Miliband hopes a new leader will revive Labour's prospects in Scotland. Ms Lamont believes the real danger is the party will look like it's still controlled by London, which could cost it votes to the SNP, and possibly prevent it forming the next UK government.
In an interview published in Saturday's edition of the Daily Record newspaper, Ms Lamont accused some Labour MPs at Westminster of failing to realise that the "focus of Scottish politics is now Holyrood, not Westminster".
She said the new devolution settlement "must start with what is best for Scotland, not what suits Westminster MPs".
Ms Lamont said: "Just as the SNP must embrace that devolution is the settled will of the Scottish people, the Labour Party must recognize that the Scottish Labour Party has to be autonomous and not just a branch office of a party based in London."
And she added: "I am standing down so that the debate our country demands can take place."
She told the Daily Record: "Any leader whose general secretary can be removed by London without any consultation is in an untenable position.
"That has to change. The Scottish Labour Party must be a more autonomous party which works in partnership with the UK party.
"We must be allowed to make our own decisions and control our own resources."
Ms Lamont said she would back the new leader, whoever they were.
She added: "I believe the Scottish Labour Party is a family - it is my family. And I hope it is led by someone who knows how to treat family members properly."
Ms Lamont, a former English teacher who joined the Labour Party as a teenager, has represented the Glasgow Pollok constituency at Holyrood since 1999.
She took over as the party's Scottish leader in the aftermath of the 2011 Scottish Parliament election, when Labour suffered a crushing defeat at the hands of the SNP.
In the weeks after the independence referendum, she said she wanted to lead Labour to victory in the next Holyrood election in 2016 and become first minister despite increasing speculation that her leadership faced significant internal opposition.
Mr Miliband said Ms Lamont deserved "significant credit" for the successful "No" vote in the Scottish referendum campaign.
'New leader'He added: "She campaigned the length and breadth of Scotland making the case for social justice within the United Kingdom.
"She has led the Scottish Labour Party with determination. I know she will continue to serve her constituents.
"Having elected a new leader, I believe the party will show the same will and determination it did in the referendum campaign to help us to victory in the general election of 2015 and the Scottish elections of 2016."
Ms Lamont is the second Scottish party leader to resign following the referendum after First Minister Alex Salmond decided to step down from his role.
Mr Salmond will be replaced as first minister and SNP leader by deputy Nicola Sturgeon at their party conference in Perth next month, but it is much less clear who will succeed Ms Lamont as Scottish Labour leader.
Former prime minister Gordon Brown has constantly been linked to the job, as has fellow MP Jim Murphy, who also played a prominent role in the referendum campaign.
Current deputy Anas Sarwar will also be seen as a candidate for the position along with a number of prominent MSPs, including Kezia Dugdale, Neil Findlay and Drew Smith.
Responding to Ms Lamont's resignation, Ms Sturgeon tweeted that she wished her well but added that if reports of divisions between the Scottish and UK Labour parties were accurate then "@scottishlabour really is in meltdown".
'Values and principles'Green MSP Patrick Harvie, who is part of the Smith Commission discussing further devolution for Scotland, said: "I'd like to wish her well and express hope that those seeking change within the Scottish Labour Party can make progress.
"Scottish voters deserve to have the option of an effective Labour Party which can advocate the values and principles which its UK leadership has sadly long ago surrendered."
A Scottish Conservative spokesman said: "Johann Lamont's resignation has shown the complete chaos at the heart of Ed Miliband's operation in the starkest possible terms. The man isn't fit to run a village fete, never mind the UK."
And in a tweet sent after Ms Lamont's announcement, Lord McConnell said: "This is a truly astonishing development. Johann leaves with head held high. Outrageous treatment of Scottish Labour Party Leader."
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