At a hastily assembled news conference Friday in Ottawa, Atleo said he wanted to avoid being a distraction in the ongoing — and intensifying — debate over the federal government's proposed changes to First Nations education.
"This work is too important, and I'm not prepared to be an obstacle to it or a lightning rod distracting from the kids and their potential," Atleo said.
"I am therefore today resigning as national chief."
Aboriginal Affairs Minister Bernard Valcourt has defended Bill C-33, dubbed the First Nations Control of First Nations Education Act, saying it meets the five conditions outlined by the AFN and chiefs during a meeting in December.
But some First Nations groups have been critical of Atleo for supporting a Conservative government bill aimed at reforming aboriginal education. They say if passed, the legislation would strip away their rights and give the federal government too much control over the education of their children.
But Atleo — who did not take questions — insisted that the work must continue.
"I challenge every party and every First Nation to carry this work forward. Failure is simply not an option," he said.
"Fighting for the status quo is simply not acceptable."
It was not immediately clear Friday who would replace Atleo as national chief. The assembly is now in the process of determining how and when a new leader will be chosen.
Rumours of Atleo's departure had been swirling in recent days, but the writing had been on the wall for some time.
Atleo's support was weakened when he agreed to meet with the prime minister at the height of the Idle No More protest movement in January 2013, but he was able to convene a national assembly as usual last December and managed to win a mandate to discuss an education package with the government.
By the time Atleo and Harper appeared together at a reserve in Alberta this past February, the AFN board had generally coalesced behind Atleo and supported his initiative. But it wouldn't last.
Even though Harper included nearly $2 billion in new school funding in the February federal budget, Atleo's support among First Nations chiefs was eroding.
Faced with pressure from outspoken critics of Atleo's negotiations with the prime minister and a deeply rooted mistrust of the federal government's role in First Nations education, one by one, the regional chiefs broke away.
Chief Perry Bellegarde of the Federation of Saskatchewan Indian Nations was the latest to announce his opposition to the federal legislation, earlier this week. That — combined with a growing push for a "special assembly" to address the education bill — was likely the straw that broke the camel's back.
The federal government, for its part, is widely expected to push forward with its legislation anyway, inviting any band who wants to co-operate to join in the new regime once it is set up.
Still, at a time when Harper wants to smooth government relations with First Nations in the hopes of paving the way for pipelines and natural resource development, sources say he has lost a key ally.
"There is no question First Nations are in an important period of transition and moving away from governance under the Indian Act," Jody Wilson-Raybould, regional chief of the British Columbia Assembly of First Nations, said in a statement.
"This work is not easy but progress must and will continue. Partnership and co-operation between and among First Nations is essential. As is co-operation among Parliament.
"We need a results driven non-partisan approach to recognition and reconciliation which will ensure, among other things, First Nations control of First Nations education."
In a statement Friday, Harper sounded a note of genuine remorse.
"Since 2009, when he was first elected as national chief, our government worked closely with him to strengthen our historic relationship," he said.
"National Chief Atleo was a conciliator and strengthened the relationship between First Nations and the Crown. As the Hereditary Chief from the Ahousaht First Nation, he showed leadership to his nation and all First Nations across Canada."
Indeed, it was on his strength as a skilled negotiator that the now 47-year-old Atleo was first elected national chief in 2009.
The seeds of discontent were sown after a high-profile Crown First Nations Gathering in early 2012. Some within the aboriginal community grew increasingly frustrated with what they perceived as government inaction in the weeks and months after the meeting.
Nonetheless, Atleo was re-elected for a second term in mid-2012.
By late 2012, the anger and frustration of many First Nations had manifested itself in the Idle No More protest movement — a period of tremendous pressure on Atleo, who fell ill and took a brief leave of absence at the height of the crisis.
Note to readers: This is a corrected story. A previous version said that Atleo was elected in 2008.