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The peer quits over concerns about her establishment links and her brother, who is alleged to have played down abuse claims.
A retired judge chosen to spearhead one of two key inquiries into claims of historical child abuse has stepped down.
Elizabeth Butler-Sloss was picked to examine whether alleged abuse by politicians and other powerful figures between the 1970s and 1990s was swept under the carpet.
However, her appointment was engulfed in controversy because as an establishment figure herself - she was considered the wrong person among victim groups and child protection campaigners to head the Government's investigation into a possible cover-up.
In addition, her late brother, Tory MP Sir Michael Havers, was the Attorney General during the 1980s.
He is alleged to have had a row with former Conservative MP Geoffrey Dickens in the 1980s in an attempt to stop him using parliamentary privilege to make allegations about paedophilia.
Baroness Butler-Sloss, who had rejected calls to quit, said in a statement on Monday that following "a widespread perception" she was not the right person to chair the inquiry, "I did not sufficiently consider whether my background and the fact my brother had been Attorney General would cause difficulties".
She said: "Having listened to the concerns of victim and survivor groups and the criticisms of MPs and the media, I have come to the conclusion that I should not chair this inquiry and have so informed the Home Secretary.
"I should like to add that I have dedicated my life to public service, to the pursuit of justice and to protecting the rights of children and families and I wish the inquiry success in its important work."
David Cameron's official spokesman insisted the Prime Minister's view the Baroness "would have done a first-class job as chair" remained unchanged.
