Mr Kelvin voluntarily stepped aside from his role three months ago as claims of harassment were examined by the fashion firm.
Ted Baker says its chief executive Ray Kelvin has "agreed to resign" as he faces allegations of inappropriate behaviour.
The fashion chain's founder took a voluntary leave of absence in December after it launched an independent investigation into claims of forced hugs and harassment.
He has denied any wrongdoing and described the allegations - including that he massaged employees and asked some to sit on his lap - as "deeply distressing".
Ted Baker said he had quit with immediate effect and its acting chief executive, Lindsay Page, had agreed to continue in the role until the appointment of a permanent successor, with David Bernstein acting as executive chairman to provide additional support.
Shares fell almost 5% on opening.
The company said its independent committee, which called in law firm Herbert Smith Freehills (HSF) to examine the allegations and its culture, was continuing its work.
The statement said the primary focus of the remainder of the investigation would centre on "Ted Baker's policies, procedures and handling of complaints."
It is expected to wrap up within weeks.
Mr Kelvin remains the company's largest shareholder with almost 35% of the stock.
He said in a statement: "Difficult though this decision is given that Ted Baker has been my life and soul for over 30 years, I've decided that the right thing to do is to step away from Ted and allow the business to focus on being the outstanding brand it is so it can face 2019 with fresh energy and renewed spirit.
"As a shareholder in the business I'll support Lindsay in his leadership and be available to him and the team wherever I can offer helpful advice.
"As a shareholder in the business I'll support Lindsay in his leadership and be available to him and the team wherever I can offer helpful advice.
"I'm extremely proud of what we've achieved in building Ted Baker to the global brand it is today.
"Thank you to every single colleague, customer, supplier, and investor for your commitment to the business. We couldn't have done it without you and I'm so grateful.
"The past few months have been deeply distressing and I'll now be taking time privately with my family to consider what my next adventure will be.
"Bye for now, Ray."
Mr Kelvin's decision to go was announced on the same day the government launched proposals aimed at giving whistleblowers greater protections.
There are said to have been scores of complaints made in relation to his behaviour - with one group claiming to represent 300 alleged victims or witnesses.
Nat Whalley, executive director of Organise - a platform used by Ted Baker employees to raise concerns - said: "Ray Kelvin's resignation shows the power of staff teaming up to create positive change at work."
She added: "The new CEO should create a culture which ensures that all staff feel safe and listened to when it comes to allegations of harassment in the workplace."
Mr Kelvin left the business less than a week after Ted Baker issued a profit warning on the back of a series of costs to the business.
Mr Bernstein said: "Ray Kelvin founded the business 32 years ago and has, together with the fantastic team around him, been the driving force behind it becoming the global brand it is today.
"As founder and CEO, we are grateful for his tireless energy and vision. However, in light of the allegations made against him, Ray has decided that it is in the best interests of the company for him to resign so that the business can move forward under new leadership.
"As a board of directors, we are committed to ensuring that that all employees feel respected and valued.
"We are determined to learn lessons from what has happened and from what our employees have told us and to ensure that, while the many positive and unique aspects of Ted's culture are maintained, appropriate changes are made.
"Sharon Baylay has agreed to act as the designated non-executive director for engagement with the Ted workforce.
"Led by Lindsay, we are confident that the strong and experienced team we have in place will build the Ted culture and move the business forward."
George Salmon, equity analyst at Hargreaves Lansdown, said: "As founder, chief executive and largest shareholder, Ray Kelvin was crucial to building Ted Baker up from a single shirt shop in Glasgow into a £1bn+ global company.
"However, a rocky few months has seen that premium market value disappear.
"The allegations around the CEO have of course played a part, but a profit warning at the back end of February shows it's not just the company's former CEO under pressure, the financials are too.
"As a result, profits are likely fall for only the second time this century."
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