The unexpected development - the first papal resignation in nearly 600 years - surprised governments, Vatican-watchers and even his closest aides.
The then Cardinal Joseph Ratzinger became Pope after John Paul II's death.
The Vatican says it expects a new Pope to be elected before Easter.
The BBC's Alan Johnston in Rome says the news has come "out of the blue", and that there was no speculation whatsoever about the move in recent days.
Italian Prime Minister Mario Monti is quoted as saying he was "greatly shaken by this unexpected news".
A Vatican spokesman, Father Federico Lombardi, said that even the Pope's closest aides did not know what he was planning to do and were left "incredulous". He added that the decision showed "great courage" and "determination".