The Scotsman, who led the Blues to Carling Cup glory last term, informed the club's owners of his decision via email, and is now poised to take the managerial reigns at arch-rivals Aston Villa.
In the frame: Cotterill, Zola and Hughton are in line to replace McLeish
Portsmouth manager Steve Cotterill has been installed by the bookmakers as the early favourite for theBirmingham job, with Billy Davies, who was sacked by Nottingham Forest on Sunday, also in the running.
LATEST ODDS Steve Cotterill 6/4
Billy Davies 3/1
Alan Curbishley 11/2
Chris Hughton 6/1
Roberto Di Matteo 8/1
The club's owners Carson Yeung and Peter Pannu are keen to find a replacement as soon as possible, with the Championship club also being linked to Gianfranco Zola, Roberto di Matteo and Chris Hughton.
The Birmingham Mail have also reported that Sam Allardyce would have been among the front-runners for the vacant post had the former Bolton and Newcastle boss not taken the West Ham job.
McLeish's decision to quit by email - with two years left on his contract - has stunned Birmingham and left acting chairman Pannu furious.
Moving house: McLeish resigned as Birmingham City manager on Sunday
'I will be meeting my legal team tomorrow (Monday),' said Pannu, who was in Amsterdam tying up his club's fourth signing of the summer when McLeish's notice dropped into his inbox.
'Rest assured I will leave no stone unturned. It's about time some discipline is instilled into this game - and I am not a person who gets pushed about.
'We spent ?40million, supported him all the way, and what we get is a relegation and a snub when the owner gave him unwavering support and did not sack him, and declared his job secure and professed trust and confidence in him.
'We just bought him three players of his choice and I've been in Amsterdam securing him a fourth. Then I get an email while I'm on business and that speaks volumes.'
Pannu insists Villa have made no official approach and McLeish, who has been on holiday, will not be allowed to talk to anyone.
McLeish quits by email but furious Blues warn boss not to talk to arch rivals VillaYou'll split the city! Birmingham stunned as McLeish lines up move to VillaFormer Villa forward Milosevic's father is shot dead by grandfather during family feudBirmingham City FC news, features and opinion Explore more:People: Gianfranco Zola, Alan Curbishley, Chris Hughton, Roberto Di Matteo, Alex McLeish, Sam Allardyce, Billy Davies Places: Amsterdam, Newcastle, Birmingham, Bolton