Mr Kejriwal, a fierce critic of prime minister Narendra Modi , was arrested nearly six months ago in the lead up to the country’s general election on charges of receiving bribes from a liquor distributor.
India's top court released him on bail on Friday, on the condition that he refrain from commenting publicly on the merits of the case.
Mr Kejriwal is the leader of the Aam Aadmi Party , which originated as a popular anti-corruption movement, and has consistently dismissed the allegations against him as politically motivated. Though it has underperformed in national elections, the party has led the Delhi legislative assembly since 2015.
Addressing his party members and supporters from the AAP party headquarters on Sunday, Mr Kejriwal announced he would step down from the office of chief minister of Delhi in two days’ time.
“Today I have come to ask the public whether you consider Kejriwal honest or a criminal,” he said.
“I will resign from the post of chief minister two days from today,” he said, as party members responded with a chorus of “No’s!”.
He also demanded the New Delhi elections, scheduled for February next year, be held in November instead.
“I will not sit on that chair till the people announce their verdict. Elections in Delhi are months away. I got justice from the legal court, now I will get justice from the people’s court,” Mr Kejriwal said.
Mr Kejriwal said he would personally engage with the public, stating he would visit every house and street, suggesting the party is preparing a major outreach campaign ahead of the upcoming capital elections, with Mr Kejriwal leading the effort.
A spokesperson for the BJP dubbed his resignation a “PR stunt” and said he “understood that his image among the people of Delhi is not of an honest leader but of a corrupt leader”.
Opposition parties widely condemned Mr Kejriwal’s arrest six months ago. They accused Mr Modi’s government of misusing federal investigation agencies to harass and weaken its political opponents. They pointed to several raids, arrests, and corruption investigations of key opposition figures in the months before the elections.
The shock announcement comes as Mr Kejriwal’s supporters celebrated his release by lighting fireworks and dancing in the rain outside his New Delhi residence, with many carrying placards with photos of the popular politician.
Some leaders from Mr Modi’s party warned that he was released on bail and not acquitted.
Government agencies have accused Mr Kejriwal’s party and ministers of accepting Rs1bn (£9m) in bribes from a liquor distributor nearly two years ago in return for revising a liquor sales policy in New Delhi, allowing private companies greater profits.
Mr Kejriwal, a former civil servant, launched the Aam Aadmi Party in 2012. He promised to rid the Indian political system and governance of corruption and inefficiency.
The party’s symbol (a broom) and its promise to sweep the administration clean of graft struck a chord with New Delhi’s residents, fed up with runaway inflation and slow economic growth.
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