Lisa Beattie, 59, was appointed leader of Midlothian Council on May 22 after her SNP group struck up an agreement with independent councillor Peter de Vink.
It is understood Ms Beattie had been told to resign or she faced a vote of no confidence at yesterday's meeting, with the qualified doctor standing down.
There will now be a special meeting next Tuesday to select a new leader, with the deputy leader taking on the top job until then.
The reasons behind Ms Beattie's resignation were not given, with a Midlothian Council spokesman claiming: "Councillor Lisa Beattie has resigned as leader of Midlothian Council. A special meeting of Midlothian Council will take place on Tuesday, 3 July to elect a new council leader. Until a new leader is elected, the duties of council leader will be managed on an interim basis by Depute Leader, Councillor Jim Bryant."
One insider described Dr Beattie as well-meaning and highly intelligent, but criticised her tenure as leader.
The SNP group had earlier told The Herald it had yet to make a formal decision about Dr Beattie's future, but acknowledged unhappiness with her leadership and suggested it might be best to solve the problem quickly rather than let it fester. Dr Beattie, 59, has a high profile inside the SNP and is married to SNP national treasurer Colin Battie, an ex-Midlothian councillor who last year became MSP for Midlothian North and Musselburgh. Councillor Owen Thompson, who was leader of the Midlothian SNP group until last month, is likely to replace her if she is forced out.
A key factor is understood to have been her recent decision to take on the huge education portfolio rather than delegate responsibility for it.
One source told The Herald: "It's not about personality. In the end, people lost faith in her."
Kezia Dugdale, Labour MSP for the Lothians, said: "People in Midlothian must be wondering what on earth is going on. They deserve better than this backstabbing and infighting.
"The council should be focussed on the big issues like jobs, housing and schools."
If Cllr Beattie were to become an independent, the administration's continuation could be in her hands.
The Herald attempted to contact Ms Beattie last night but a reply from her council email address said she would not be available for the next three weeks. Mr Beattie was also unavailable for comment.