Making the announcement on state TV after talks with the presidents of Guinea and Mauritania, Jammeh said he believed that it was not necessary to have a “single drop bloodshed”.
Ending his speech in a shaky voice, he thanked his mother, wife and children for all their prayers and support throughout the 22 years he ruled the country.
“My decision to step down wasn’t dictated by anything but in the interest of the people of Gambia,” he said.
“All this while, as a Muslim and a patriot, I believe it is not necessary that a single drop of blood be shed.
“I have decided today in good conscience to relinquish the mantle of leadership of this great nation with infinite gratitude to all Gambians.
“I promise before Allah and the entire nation that all the issues we currently face will be resolved peacefully.
“My decision today was not dictated by anything else but the supreme interest of you, the Gambian people and our dear country.
“I’m proud and honoured to have served our country, the Gambia.”
Adama Barrow, who won the December election, could not take oath of office in Gambia because of Jammeh’s refusal to hand over power.
He was sworn into office in The Gambian embassy in Senegal.