Twitter Inc. announced the move in a press release Thursday and Costolo also tweeted the news through his own account.
The San Francisco company says co-founder and Chairman Jack Dorsey, 38, will be its interim CEO while it looks for a replacement.
Costolo, 51, will stay on Twitter's board of directors. He has been a director since September 2009 and became CEO in October 2010.
Click here to read the entire statement from Twitter.