DUP leader Peter Robinson has asked Enterprise Minister Arlene Foster to step in as First Minister for six weeks.
In a statement Mr Robinson said he was temporarily stepping down as Northern Ireland First Minister in an attempt to clear his name following the scandal surrounding his wife Iris.
Read Peter Robinson's statement
Watch Peter Robinson's statement
The development came within hours of DUP members offering Mr Robinson their full support, but he said today he needed time to care for his family, allow the crisis to be investigated and help resolve the threat to the future of the Assembly.
'As a father and a husband, I need to devote time to deal with family matters,' he said.
He added: 'I continue to contend I have acted ethically and it is particularly painful at this time of great personal trauma that I have to defend myself from an unfounded and mischievous allegation.'
Assembly speaker William Hay told the chamber this afternoon: 'I think it is important that I share with you a letter that I have just received from the First Minister.
'I wish to inform the House that I have this afternoon received written notice from the First Minister Peter Robinson that under the Northern Ireland Act 1998 he has designated Mrs Arlene Foster to exercise the functions of the office of First Minister.
Mr Hay said he was calling a meeting of party whips to discuss the move.
Acting First Minister Mrs Foster addressed the assembly in the aftermath of the announcement.
'On behalf of the First Minister, I want to make it clear that he entirely rejects the sole allegation made by the BBC Spotlight programme and will be seeking to clear his name in the days that lie ahead,' the Fermanagh and South Tyrone member said.
The DUP had met in Belfast this morning to discuss the crisis over the controversies surrounding Mrs Robinson, which were revealed in a BBC news programme last week.
Sinn Féin leader Gerry Adams has said that he believes the contentious political issues at Stormont will be sorted out and that his party is determined to see beyond the current difficulties.
SDLP leader Mark Durkan said he did not think Mr Robinson could return to the post without being much diminished.
Iris Robinson receives treatment
Mrs Robinson is receiving 'acute psychiatric treatment' as the controversy about her private life and finances continues.
A spokesman for Mr Robinson said the information was disclosed after a media report that she was at a French ski resort.
A BBC programme broadcast last week alleged that the DUP leader failed to tell the relevant authorities that his wife got £50,000 from two Belfast property developers.
It claimed she gave the money to a then 19-year-old man with whom she was having an affair.
Taoiseach calls for focus
Taoiseach Brian Cowen has extended his best wishes to the Robinson family as the try to deal with the matter.
Mr Cowen added: 'I welcome his decision to continue to work on the crucial issue of devolution of policing and justice and his commitment to a successful resolution.
'Amidst all of these serious developments, the political leaders of Northern Ireland now need to focus on the stability of the democratic institutions and on continuing to move forward to a better future for the entire community.'
The Taoiseach said he had been in contact in recent days with British Prime Minister Gordon Brown to discuss the matter.
Mr Cowen also confirmed that Minister for Foreign Affairs Micheál Martin will meet the Secretary of State Shaun Woodward in Dublin tomorrow to 'review the situation'.
Downing Street has said that Gordon Brown and the British government remains focused on the devolution of policing and justice in the Northern Ireland.
The Prime Minister's official spokesman said that Mr Brown remained 'fully engaged' with the issue.
