His resignation comes days after Theresa May secured the cabinet's backing for her Brexit plan despite claims from Brexiteers that it was too "soft".
Mr Davis was appointed Brexit secretary in 2016 and was responsible for negotiating the UK withdrawal from the EU.
A Brexiteer hailed his resignation as a "principled and brave decision".
Conservative MP Peter Bone said Mr Davis had "done the right thing", adding: "The PM's proposals for a Brexit in name only are not acceptable."
Labour Party chairman Ian Lavery said: "This is absolute chaos and Theresa May has no authority left."
The resignation comes as Mrs May prepares to face the House of Commons and then Tory MPs and peers on Monday to discuss her Brexit plan.
Mrs May is expected to tell MPs that the strategy agreed on by the cabinet at Chequers on Friday is the "right Brexit" for Britain.
Mr Davis is yet to comment on his resignation, but Daily Express correspondent Sarah O'Grady, the wife of Mr Davis' special adviser Stewart Jackson, said "DD decided he couldn't sell out his own country".