Miami Republican Frank Artiles reportedly insulted two black senators during a bar chat at the Governors Club in Tallahassee.
Mr Artiles apologised for the incident on Wednesday, but the two lawmakers and critics called for his resignation.
In a letter to the Senate president, Mr Artiles called himself a "distraction".
"My actions and my presence in government is now a distraction to my colleagues, the legislative process, and the citizens of our great State," he wrote to Senate President Joe Negron.
"I am responsible and I am accountable and effective immediately, I am resigning from the Florida State Senate."
"It's clear there are consequences to every action, and in this area, I will need time for personal reflection and growth," he added.
According to the Miami Herald, the incident began after 22:00 local time on Monday over drinks at the members-only club, located just steps from the State Capitol.
A lawmaker approached Mr Artiles to ask if his objections to a bill she had filed were political payback for her questions about one of his previous bills.
Mr Artiles reportedly used insults and profanity against African-American Senators Audrey Gibson of Jacksonville and Perry Thurston of Fort Lauderdale.
He allegedly referred to Ms Gibson as a "bitch" and a "girl".
According to witnesses, Mr Artiles also said Republican Senate President Joe Negron, who is white, owed his position to "six [racial slur]".
It is unclear who he was referring to because the chamber's black senators are all Democrats, none of whom voted for Mr Negron.
During Monday night's discussion, Mr Artiles reportedly sought to justify his use of the n-word, insisting he intended a slang pronunciation that he thought was not offensive.
But Mr Negron ordered an investigation and forced Mr Artiles to apologise on Wednesday.
Afterwards, Mr Artiles told reporters he would not resign and would "file for 2018 and win my election", the Miami Herald reported.
On Thursday, Mr Artiles added he was stepping down to protect his family.
"While I take full responsibility for using language that was vulgar and inappropriate, my family has fallen victim to a political process that can distort the truth for the sole purpose of political gain," he said.
A Florida state senator has resigned amid backlash over reports that he used racial slurs over drinks with African-American colleagues.