"I have tendered my resignation in a spirit of appeasement," said the 60-year-old, who has been at the helm for 18 years, after a meeting of the governing body in Sofia.
His resignation follows violent scenes on November 16 when thousands of supporters gathered outside the stadium where Bulgaria were playing Hungary in a Euro qualifier, calling for an end to Mihaylov's tenure.
Police used water cannons and batons to disperse the crowd and several dozen fans and police were injured in the clashes that followed.
Bulgaria drew the game 2-2 but it was not enough to send them through to next year's Euros in Germany -- their last appearance at a major championship was the 2004 Euros in Portugal.
Despite the setbacks, Mihaylov, who was a member of the golden era of Bulgarian players who finished fourth in the 1994 World Cup, said he was "proud of what has been achieved".
Vice-president Mihail Kasabov will take over as interim president until next year's congress, when the decision must be ratified and new candidates examined.
Mihaylov resigned once before in October 2019 after a racist abuse scandal during a match against England.
However, he reversed his decision and returned a year and a half later. He is the longest-serving head of the BFU, having been elected five times since 2005.
His presidency was marked by recurring allegations of match-fixing and illegal betting, misappropriation of public funds and conflicts of interest.
