Lord Lester of Herne Hill was suspended from the Liberal Democrats this year following the allegations, which he has called “completely untrue”.
A party spokesman said Lord Lester had made “the right decision”.
Last month a report by the privileges and conduct committee upheld a complaint of sexual harassment against the peer, received in November 2017.
The report had originally recommended that Lord Lester should be expelled from the Lords but this was later reduced to a recommended suspension until 2022.
The complaint claimed that Lord Lester “had sexually harassed the complainant, had offered her a corrupt inducement to have sexual relations with her, and had warned her of unspecified consequences if she did not accept his offer”.
Lord Lester denied all the allegations, stating that he had “produced evidence which clearly demonstrated that what I was said to have done 12 years ago did not happen”.
Following a debate last month, peers voted to send the case back to the committee to look at it again.
A Liberal Democrat spokesman welcomed the peer’s resignation on Tuesday.
“Lord Lester has made the right decision in retiring from the House of Lords.
“The leadership of the Liberal Democrats supported the original report from the Privileges Committee that had recommended his suspension from the House.
“We hope that Lord Lester’s decision now draws a line under this situation.”
Lord Lester is a veteran human rights lawyer who worked for several decades on gender equality and race relations. He joined the Lords in 1993.