“I believe it is in the best interests of British Cycling for me to step down from my position as technical director,” the 58-year-old Australian said in a statement.
British Cycling suspended Sutton on Tuesday after it was claimed he called Paralympic cyclists “gimps”, shortly after announcing an independent review into claims of sexism made by cyclist Jess Varnish.
Varnish alleges she was told to “go and have a baby” after her contract was not renewed.
Ten-time Paralympic medal winner Darren Kenny, who was quoted as saying: “The attitude towards (members of the disability team) was abysmal. We were tolerated at best. The term used to refer to us was generally “gimps”, with another word in front of that.” Sutton said: “It is absolutely crucial that, as our athletes begin their final preparations for Rio, they are able to do so free of distraction.
“The developments over the past few days have clearly become a distraction.
“It is for this reason, and having spoken to friends and family, that I believe it is in the best interests of British Cycling for me to step down from my position as technical director.”
British Cycling chief executive Ian Drake said: “I understand and respect Shane’s decision to stand down. Andy Harrison, programmes director at British Cycling, will be taking over with immediate effect and will manage the team in the build-up to Rio 2016.”
Sutton continues to refute the allegations and will take part in the independent review.
He added: “It is important that the review announced by British Cycling and UK Sport now takes place, and I will obviously cooperate fully with this.
“I have made clear that I reject the specific claims that have been made against me in recent days, and I look forward to taking a full part in the review process so I can respond to the allegations in detail.”
Sutton succeeded Dave Brailsford as British Cycling chief in 2014.
Sutton, as head coach, was then-performance director Brailsford’s key lieutenant in the British team which won eight gold medals at the 2008 and 2012 Olympics.
Sutton is a blunt character, but there are many riders who will have had only positive experiences of his coaching and who enjoyed good working relationships with him.
He added: “Cycling is my passion and I have always worked to get the very best out of professional athletes.
“I am proud of what British Cycling has achieved and I am excited by the potential of the team for Rio. They will always have my full support.”
There were further claims of discrimination made against Sutton yesterday. Malaysian cyclist Josiah Ng alleged Sutton called him ‘Boatie’, which could be interpreted as a reference to people sailing from Asia to seek asylum in Australia.
Ng does not believe the comments were intended as racist, more affectionate, but founded on ignorance. “I don’t think he’s racist. His actions are racists, but I personally don’t think he’s racist.
“It’s not something I let bother me. I know he probably took a liking to me. When people like each other they give stick to each other, but I never gave it back to him.
“I don’t think he has adjusted to modern society. You could get away with that 30 years ago.
“It doesn’t seem like he’s a bad guy, but I wouldn’t personally want to work with him.”