James Murdoch has resigned as chairman of BSkyB, saying he did not want his position to become a "lightning rod" for the company.
Mr Murdoch stood aside from his role with immediate effect at a board meeting on Tuesday afternoon, but will remain a non-executive director of the company, which owns Sky News.
His departure comes despite receiving backing from BSkyB shareholders, who reappointed him at the company's annual general meeting last November.
Explaining his resignation, Mr Murdoch said he wanted to distance the television broadcaster from events at News International (NI).
In a letter to the board, he wrote he was "determined that the interests of BSkyB should not be undermined by matters outside the scope of the company".
Mr Murdoch leaves the position just weeks before an MPs' report is published into phone-hacking practices at the now-defunct News Of The World , which was published by NI.
He said in his letter: "I have been privileged to serve first as chief executive and then as chairman of this outstanding company and I am proud of what we have achieved over this period.
"As attention continues to be paid to past events at News International, I am determined that the interests of BSkyB should not be undermined by matters outside the scope of this company."
He added: "I am aware that my role as chairman could become a lightning rod for BSkyB and I believe that my resignation will help to ensure that there is no false conflation with events at a separate organisation."
Shares in BSkyB closed on Tuesday 0.8% or 5.5p lower on the day at 675.5p.
The company's deputy chairman, Nicholas Ferguson, will take over from Mr Murdoch.
Mr Ferguson said: "The board's support for James and belief in his integrity remain strong.
"We understand his decision to step aside at this time and we both welcome and look forward to his continued contribution as a non-executive director."
In a statement Rupert Murdoch, the chairman and CEO of News Corporation - the 39% controlling shareholder of BSkyB - paid tribute to his son's "successful leadership".
"He has played a major role in propelling the company into the market-leading position it enjoys today - and in the process has been instrumental in creating substantial value for News Corporation shareholders," the senior Mr Murdoch said.
The development follows Mr Murdoch junior's decision in February to leave his role as executive chairman of News International , the UK newspaper business of News Corporation, which has been hit by allegations of phone hacking.
News International publishes The Times, The Sunday Times and the Sun, and published the News Of The World before it was shut down last July.
Mr Murdoch junior said in a letter to the Department for Culture, Media and Sport (DCMS) select committee last month that he accepted his share of the blame for not uncovering phone hacking at the Sunday tabloid sooner, but denied he had turned a "blind eye" to allegations of criminal wrongdoing.
The cross-party MPs that make up the DCMS are due to publish a report following their inquiry into phone hacking towards the end of April.
John Whittingdale, chairman of the DCMS committee, said he was not wholly surprised by Mr Murdoch's decision.
"The name Murdoch is a powerful one and the fact he was in the chair at BSkyB was always going to continue to provoke controversy," he said.
Pressure on Mr Murdoch intensified last month when the media regulator Ofcom stepped up its inquiry into whether BSkyB is a "fit and proper" broadcaster given the circumstances surrounding News Corporation and Mr Murdoch.
The phone-hacking revelations have led to an ongoing public inquiry , conducted by Lord Justice Leveson, into the culture and ethics of the British press.
Mr Murdoch and his father Rupert are expected to give evidence to the inquiry in the coming weeks, before a final report is published.
With judgments from all three inquiries expected in due course, Martin Moore, director of the Media Standards Trust and founder of the Hacked Off campaign told Sky News Mr Murdoch's decision was "the right thing to do".
Mr Murdoch has neither been arrested nor treated as a suspect by police in their investigation into phone hacking.
He was appointed chairman of BSkyB in December 2007, so has spent just over four years in the role. He was formerly chief executive of BSkyB between February 2003 and December 2007.
He was not reappointed as BSkyB chairman with ease, as a number of top investors raised concerns over how his links to the phone-hacking inquiry could damage the company's reputation.
Former News International executive Jack Irvine told Sky News Mr Murdoch's decision to quit as chairman was "inevitable".
Speaking on Sky's Boulton & Co , he said: "It's a very wise move. It should maybe have happened a bit sooner and the appointment they've made is a superb one."
He added that the move was "reputational".
"The trouble is TV companies for some peculiar reason have to have a much higher standard of business propriety than newspapers. You've got to be seen to be cleaner than clean." he said.
"What I would say is the period James has been in the job, I think he's done an absolutely magnificent job and I think it's such a tragedy it has to end this way."
Tom Mockridge, who joined the BSkyB board in February 2009, will succeed Mr Ferguson as deputy chairman of the company.
Mr Mockridge said it was an honour to take on the position, adding: "It is disappointing this event is triggered by the change of role of James Murdoch.
"Sky today is the UK's largest media company and a world-class performer.
"This achievement has been possible only because of two decades of ongoing commitment, passion and entrepreneurial risk-taking by News Corporation, its founder Rupert Murdoch and, for the past near decade, James."
Mr Murdoch junior remains deputy chief operating officer of News Corporation.