Chiranjeevi had merged his Praja Rajyam Party with the Congress earlier in 2013.
His resignation comes after a day after the Union Cabinet cleared a bill for creation of a 10-district Telangana state.
After the Cabinet meeting, Union Home Minister Sushilkumar Shinde said Hyderabad will be the common capital of both Andhra Pradesh and Telangana for a period not exceeding 10 years.
He said the government wants the bill to be tabled in the Winter Session of the Parliament.
"Cabinet has approved the recommendation of the Group of Ministers (GoM)," Shinde told reporters.
"Telangana will be comprised of 10 districts," he said.
The bill now requires the President's assent.
The GoM on Tuesday had taken up the draft bill for bifurcating Andhra Pradesh and forming Telangana. Prime Minister Manmohan Singh had said his government is fully committed to the formation of the new state.
"Our government is committed to the formation of Telangana and it will be our effort to make full use of the due process of law to ensure that Telangana just come about," he said.
India's ruling Congress party in July this year approved a move to carve out the Telangana region of Andhra Pradesh as the 29th state of the country, giving in to a five-decade-long demand from supporters in a major decision ahead of 2014 elections.
Officially urging the government to take constitutional steps that will see the state's formation, the Congress Working Committee (CWC) passed a resolution following a meeting of the constituents of the ruling United Progressive Alliance (UPA).
The Telangana region, which merged with Andhra Pradesh in 1956 against the wishes of many local residents, comprises 10 districts - Adilabad, Hyderabad, Khammam, Karimnagar, Mahbubnagar, Medak, Nalgonda, Nizamabad, Rangareddy, and Warangal.
--IBNS (Posted on 06-12-2013)