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AFL Chairman Mike Fitzpatrick made the announcement during a packed press conference at AFL House on Monday morning.
Demetriou said he had no regrets about the decision.
"I advised Mike officially when we were both over at the Super Bowl that I intended to announce my resignation in early March," Demetriou said.
"I've always said it's an honour and privilege to serve in this role, but any organisation needs renewal and needs a new set of eyes.
"I also believe the time is right. The growth of the game has been extraordinary.
"It's been a wonderful journey full of challenges but I wouldn't have it any other way.
"I leave the game with no regrets."
Demetriou also said the ongoing ASADA investigation into Essendon's 2012 supplements program played no part in the timing of his decision.
"None whatsoever ... we (Fitzpatrick and I) both started talking about this in 2012," he said.
"We got together in New York and we agreed the start of March would be the right time ... I think it’s part of good governance.”