"The role has taken a heavy toll on me personally, and on my family, and this has become untenable from a health perspective," he said in a statement.
National MPs, who were understood to be shocked by this morning's announcement, will meet tonight to discuss replacing Muller.
Tonight's caucus meeting was arranged to "discuss the way forward", senior whip Barbara Kuriger said.
"Our thoughts are very much with Todd and his family at this difficult time as is our compassion and love for Todd," Kuriger said.
"No further comment will be made until after the meeting."
Early contenders to replace him are his current deputy Nikki Kaye - who is now the acting leader - and the prospect of Judith Collins also lurks in the background.
"It has become clear to me that I am not the best person to be leader of the Opposition and leader of the New Zealand National Party at this critical time for New Zealand," Muller said today.
"It is more important than ever that the New Zealand National Party has a leader who is comfortable in the role."
Muller says the role had taken a "heavy toll" on him personally.
He intended to take some time out of the spotlight to spend with his family and to restore energy before reconnecting with his community.
Prime Minister Jacinda Ardern said in a statement that she just heard about Muller's resignation: "No matter what side of Parliament you're sitting, politics is a difficult place. I have passed on my best wishes to Mr Muller and his family," she said.
