The Reform UK leader said he would be fighting the by-election in the constituency, to give voters a chance to “stick two fingers up to the establishment”.
Mr Farage was making a statement on his “future in public life”, amid speculation he could resign over a series of donation scandals.
Announcing his resignation and intention to run in a by-election, he said: “I will fight to continue the political revolution reform has started.”
It follows intense pressure after reports that long-term ally convicted criminal George Cottrell had provided funding for security and staffing in the year before he was elected.
It is the latest financial scandal to engulf Mr Farage, who is already being investigated by the standards commissioner over a £5 million gift the MP received from crypto-billionaire Christopher Harborne.
‘I’ve never been angrier in my life’
Nigel Farage has said he has ‘never been angrier’ in his life as he claims journalists approached his daughter at her home.
The Reform UK leader earlier accused Sky News of “harassing” his family.
Sky News said it had not contacted anyone from Mr Farage’s family about the story.
But the Reform UK leader later said this was “an outright lie”, accusing the broadcaster of having “hounded” his daughter at home.
In a statement on Tuesday, he said: “I will not tolerate intimidation of my family.
“Am I angry? I’ve never been angrier in my life.”
Farage accuses ‘establishment’ of using ‘foul means’ to beat Reform
Nigel Farage suggested “the establishment” had chosen to use “foul means” to beat Reform UK as he said he had “not broken the law in any way at all”.
In a televised statement, the party leader pointed to electoral gains it made in May and said: “It seems to me that the establishment have now decided that they can’t beat us fairly, so they’ve chosen to use foul means.
“Let me be absolutely clear, after the furore and the media pile-on, well, not just the media, the other political parties too – let me be absolutely clear – I have done nothing wrong.
“I have not broken the law in any way at all. I have not misused public money, and you know, for the first two years of being an MP, my personal MP expenses are zero, not of course that you’ll read about that in mainstream media.”