The announcement comes nine months after the departure of former party president Moira Coatsworth following last year's massive election defeat.
Mr Barnett will take up an undisclosed new job in November, and will remain in the role until the party's 2015 conference.
Current Labour Party president Nigel Haworth praised Mr Barnett for his work.
"Tim has been a tireless servant of the party and it is with sincere regret that I have accepted his resignation.
"During his time in the role the party has undergone significant constitutional reform and the party is in excellent heart."
The party says it will open applications to take Mr Barnett's place in due course.
Mr Barnett oversaw Labour's Christchurch East, Ikaroa-Rawhiti and Northland by-election campaigns as well as last year's general election.
He spent 12 years as an MP from 1996 to 2008.
It is today's second high-profile political resignation, with former Green Party co-leader Russel Norman leaving Parliament to become the executive director of Greenpeace New Zealand.