The move on Friday follows an outcry over RFU chief executive Bill Sweeney's paycheck of £1.1 million ($1.37 million) for the 2023/24 financial year, which included a bonus of £358,000.
The RFU announced later Friday that Bill Beaumont, who held the role from 2012 to 2016 and in November stepped down as World Rugby chairman, had been appointed as interim chairman.
Ilube, in a RFU statement, said: "I have decided to step down from my role as chair of the RFU as recent events have become a distraction from the game, but will stay on to ensure a smooth transition to a new chair as soon as one is in place."
The RFU, which held an emergency council meeting on Wednesday, has announced an independent review of its executive pay scheme.
Ilube had been facing motions calling for his removal after a grassroots revolt gathered enough support to trigger a special general meeting.
"I'm pleased that an independent review of the LTIP (long-term incentive plan) scheme has been commissioned and look forward to its findings once completed," said Ilube.
"It has been an honour to chair the RFU and I look forward to once again enjoying the game that I grew up with from the touchline and watching it grow."
Beaumont, a former captain of both England and the British and Irish Lions, paid tribute in a separate statement to the "great work and passion" of Ilube.
"We now must look forward and I hope I can help to unite the game and drive forward the game of rugby in England at both an international level and in the community game," he added.
Beaumont's appointment will need to be ratified by the RFU Council, with the RFU saying recruitment for a permanent chairman "will commence as soon as practical".
Many people within English rugby union are furious at the amount earned by Sweeney given the RFU reported an operating loss of £37.9 million for the same period, the highest it has ever recorded.
In addition, 42 staff were made redundant in September.
On the pitch, the England men's team won just five of their 12 matches in 2024 and grassroots participation is in decline.
Sweeney's position is also under threat, with a motion for the RFU board to dismiss him set to be tabled at the forthcoming special general meeting.
Ilube was head of the remuneration committee that signed off the long-term incentive plan that is the basis for the bonuses awarded to Sweeney and other executives.
