"This is something I have been considering for some time as it has been my long-held belief that my successor should have at least 18 months in the job to imprint his vision on the team for the 2011 World Cup," Jayawardene, 31, said in a statement.
Jayawardene's decision to quit came after India completed a 4-1 rout of Sri Lanka in the recent one-day series.
The middle-order batsman, who led Sri Lanka for the first time in April 2004, did not play in Tuesday's Twenty20 international here, which India won by three wickets.
"After much thought, I have concluded that the right time has now come for fresh leadership to takeover," said Jayawardene.
"It was not an easy decision to make because being the Sri Lanka captain has been the source of enormous pride. I am very grateful to have been granted the honour of leading the team.
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Jayawardene however made it clear he was not quitting the team altogether.
"I look forward now to extending my full support to my successor a