John Weighell, who will remain a councillor, said resigning now would enable a new leader time in the job ahead of elections in 2018.
The Conservative group said it would elect a new group leader on 13 May.
The council will meet formally to elect a new council leader on 20 May.
Mr Weighell, who was first elected as a councillor for Bedale in 1992, said he had "thoroughly enjoyed" his time as leader and was proud of how the authority had managed budget cuts.
"Wherever possible, we have made savings from the council's bureaucracy rather than front-line services," he said.
The Conservative group has a comfortable majority on the council, winning 45 of 72 seats at the last election in 2013.
The leader of North Yorkshire County Council is to stand down as both council and Conservative group leader after 14 years.