In a statement, Mr Parry said the High Court of Australia had given "absolute clarity" on constitutional rules that prevent the election of dual citizens.
On Friday, the court decided that five politicians - including Deputy Prime Minister Barnaby Joyce - were invalidly elected.
Mr Parry first raised questions about his citizenship on Tuesday.
The senior government figure said he had decided to resign with "a heavy heart" after the British Home Office confirmed he was a citizen by descent through his father.
The role of Senate president is to preside over Australia's upper house. Mr Parry's successor is expected to be another government senator.
A replacement for his Senate seat will be chosen through a recount of election votes.
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Mr Parry will become the third government member to lose their job over dual citizenship, following the disqualifications of Mr Joyce and Regional Development Minister Fiona Nash.
The saga has also claimed three senators from minor parties - Larissa Waters, Scott Ludlam and Malcolm Roberts.
Two other senators, Matt Canavan and Nick Xenophon, faced scrutiny over their citizenship, but the court ruled they were validly elected.
Mr Joyce hopes to regain his seat in a by-election on 2 December.
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