Powell sent his letter of resignation to President Bush with "pride and regret." In a statement, he added that he had fulfilled a "bold and aggressive" agenda and it was time for someone else to hold the top post.
In the beginning of his tenure, Powell had called for easing regulations but later supported the largest fines ever issued for broadcast indecency.
"Chairman Powell has been a valued member of the administration," White House spokeswoman Erin Healy said. "He has shown a strong commitment to expand the reach of new communications technologies and services and has helped advance the president's goal that all Americans should have access to affordable broadband by 2007."
Powell received national attention following the uproar when Janet Jackson's breast was exposed on national television during the 2004 Super Bowl half-time show. In September, the FCC fined Viacom, CBS' parent company, $550,000 for the fiasco.
In November, Viacom also agreed to pay $3.5 million for the complaints aimed at its radio stations, which included remarks made by shock jock Howard Stern.
On his show Friday Stern commented on Powell's impending resignation.
"Thank God he's gone," Stern said. "This is a great day in broadcasting."
Powell was appointed to the FCC by President Clinton in 1997 and was awarded the top post there by President Bush in 2001.
While leading the FCC, Powell also backed new relaxed media ownership rules. Some of the proposed changes said a company can own stations that reach 45 percent of U.S. households, up from 35 percent, and that one company can own a broadcast outlet and a newspaper in the same city, ending the rule against cross-ownership in all but the smallest markets.
Although the proposals passed in June 2003, they were blocked by a U.S. Court of Appeals in June 2004. The court ordered the FCC to better justify easing ownership regulations.
Possible replacements for Powell include another Republican member of the commission, Kevin Martin; Becky Klein, a former head of the public utility commission in Texas; Patrick Wood III, the head of the Federal Energy Regulatory Commission; and Michael Gallagher, head of the National Telecommunications and Information Administration in the Commerce Department, The New York Times reported.