"Serving as a Congressman has been the greatest honor of my life," Wu said in a statement. "There is no other job where you get up each day and ask, 'How can I try to make the world a better place today?'"
Wu, 56, becomes the latest in a long line of politicians from both parties to become caught up in sex scandals over the years, and the second House Democrat since June to have his tenure cut short by such a controversy.
Wu's conduct has been called into question previously. He acknowledged earlier this year he was undergoing psychiatric treatment after his staff complained of erratic behavior, including his e-mailing of a picture of himself dressed in a tiger costume.
The latest allegations against Wu surfaced last month when the Portland Oregonian newspaper reported the daughter of a high school friend who contributed to Wu's campaign accused him of making an unwanted sexual advance around Thanksgiving of last year.
Details of the nature of the alleged encounter have not been disclosed. Wu has not denied the accusation but has acknowledged more than once the allegation was "serious."
Wu, the first Chinese-American elected to Congress, promised last month to step down, but said at the time he wanted to wait until after the crisis over the U.S. debt ceiling was resolved.
Wu had said in February that he was undergoing psychiatric treatment after his staff complained about his erratic behavior in the run up to the November 2010 Congressional elections.
They said Wu had behaved strangely at meetings and had e-mailed pictures of himself wearing a tiger suit to staff. Several key staff members resigned following the election.
Wu, who represents the Portland area, is in his seventh two-year term in the House. Two Democrats have already announced they will seek Wu's seat in the 2012 congressional election.