The move by the England international may signal the end of Southgate's Villa career, which has been in doubt since before Euro 2000 last year when he handed in a transfer request at Villa Park.
The former Crystal Palace ace had indicated that he wanted to move to a new club as he felt that Villa could match his ambitions and that he was keen to join a club capable of winning honours on a consistent basis.
He has previously admitted it has been awkward for him retaining the captaincy this season when he still wants to leave the club, but he has battled on admirably putting in some impressive performances for Villa this season.
"I have had a meeting with the chairman Doug Ellis and manager John Gregory and having given very careful consideration to my protracted position, I have advised the manager of the following decision," said Southgate on his own official website.
"I have been extremely proud to serve Aston Villa Football Club as captain since 1997, but now feel the present situation compromises this role, and as such have resigned as captain forthwith."
Southgate has been at Villa since 1995, joining in a £2.5 million move from Crystal Palace but he is unhappy at the club's apparent lack of ambition of challenging the top clubs in England and Europe.
Villa are keen to hang onto the influential skipper and there have been no official bids from any interested clubs.
Southgate feels that the club have priced him out of a move away from the club by putting a £6 million price tag on his head.
Chelsea, Tottenham Hotspur, West Ham United and Liverpool have all been reported to be interested in the talented defender and it seems that now his days at Villa Park are numbered and he will move on in the summer.
The news will be a big blow to Villa boss John Gregory, who had hoped to open talks with the player aimed at persuading him to pledge his future to the club and that his ambitions could be met by the Midlands outfit.