Yes lost the referendum, with 55% voting 'no' and 45% voting 'yes'.
As well as stepping down as First Minister, he will step down as SNP leader.
Speaking in Edinburgh, on the BBC, Mr. Salmond said that a replacement would be in place by the SNP annual conference Perth 13th - 15th November - less than two months from now. Alex Salmond will remain first minister until the conference.
He said: "there are a number of conventions" about who will suceed him. He said he would not choose a prefered candidate and let the SNP members choose.
Alex Salmond said that there are a "number of eminently qualified and very suitable candidates for leader."
The obvious choice is Nicola Sturgeon, however, as she stood beside him at the helm of the Yes movement, her appointment would be questioned.
Fiona Hyslop, the cabinet secretary for Culture and External Affairs, could be a potential candidate. As could Education and Lifelong Learning Secretary, Michael Russel.
The SNP have 65 MSPs so there could be a few dark horses.
The next leader, once voted in by the Scottish Parliament, will be the 5th First Minister of Scotland, following Donald Dewar, Henry McLeish, Jack McConnel and of course Alex Salmond. Whoever s/he may be they will lead the SNP into 2016's Scottish election. The new leader will have the role of working with the main three Westminster parties to ensure the new powers promised for Scotland.
Alex Salmond said he 'made the decision this morning'.
He will not 'withdraw from political life' and will stand as an MSP candidate in 2016, but he will make sure 'Westminster' keeps its promises on extra powers.
Ruth Davidson, the Scottish Conservative leader tweeted, in response to the news: 'The FM has served Scotland & I wish him well, but he seems confused by the timetable promised.' She then attached a picture of the timetable to her tweet.
Patrick Harvie, the Scottish Green co-convener, who fought beside Mr Salmond for a 'yes' vote said, on his website: 'Despite our differences on a range of issues, I want to pay tribute to Alex Salmond for the role he has played in changing our political landscape.'
Whatever people say about Alex Salmond, no one can deny that he is a great orator and has been a fantastic politician. But the question now is: who's next?