"I could have taken the easy way out by casting aside my principles to remain as prime minister -- but that is not my choice," he said in a televised address.
"I will never work with kleptocrats."
He has claimed that several MPs who pulled support from his coalition -- including scandal-plagued ex-leader Najib Razak -- had been angered that he refused to get corruption cases against them dropped.
The national palace confirmed the monarch, Sultan Abdullah Sultan Ahmad Shah -- who formally appoints the premier -- had accepted Muhyiddin's resignation.
It said in a statement Muhyiddin would serve as a caretaker prime minister until a replacement is found but the monarch was not in favour of polls now due to the outbreak.
Muhyiddin came to power in March last year without an election at the head of a scandal-plagued coalition following the collapse of a two-year-old, reformist government led by Mahathir Mohamad, a political heavyweight in his nineties.
But his government faced turmoil from day one -- his majority in parliament was in doubt, its legitimacy was constantly questioned, and he faced a constant challenge from opposition chief Anwar Ibrahim.
Criticism over virus response
The demise of his government extends a period of political drama for the multi-ethnic nation of 32 million.
After independence from Britain in 1957, Malaysia was ruled for over six decades by a coalition dominated by the country's ethnic Malay Muslim majority.
But corruption scandals, unpopular race-based policies and increasingly authoritarian rule prompted weary voters to boot the coalition and its leader Najib out of power at 2018 polls.
The victory of Mahathir's opposition alliance fuelled hopes for a new era, but it collapsed amid bitter infighting.
As well as questions over its legitimacy, Muhyiddin's government faced mounting criticism over its failure to keep the virus under control -- officials have now reported over 1.1 million cases and 12,000 deaths.
In January, he persuaded the king to declare Malaysia's first nationwide state of emergency for over half a century, ostensibly to fight the pandemic.
But parliament was also suspended for months, leading to criticism that Muhyiddin was using the crisis to avoid a no-confidence vote.
Muhyiddin's position finally became untenable after a group of once allied MPs withdrew support, depriving him of a parliamentary majority turned against him.
He made his last bid to stay in power on Friday, appealing to opposition MPs to back him in a no-confidence vote -- but his offer was rejected.
There are a number of possibilities for the next government -- the remnants of Muhyiddin's government could try to form a coalition, while the opposition will also take a run at power -- but it is wide open.
"His replacement is anybody's guess," said Oh Ei Sun, an analyst at the Singapore Institute of International Affairs.