"It is time for a significant change," Domenicali said in a Ferrari statement announcing his resignation.
Ferrari have failed to get in the top three in the first three races of the season and are just fifth in the constructors' table.
Ferrari's North American CEO Marco Mattiacci will assume control of the team, his remit simple - to reverse the scuderia's fortunes in a year when Mercedes are leaving all in their wake.
Domenicali took over from Jean Todt as Ferrari's team principal in 2008. But he has faced growing pressure over the poor performances of drivers Fernando Alonso and Kimi Raikkonen.
"There are special moments that come along in everyone's professional life when one needs courage to take difficult and very agonising decisions," Domenicali said in the statement.
"It is time for a significant change. As the boss I take responsibility, as I always have done, for our current situation," he added. "This decision has been taken with the aim of doing something to shake things up," he said.
Ferrari president Luca di Montezemolo thanked Domenicali "for his sense of responsibility up to today where he placed Ferrari's interests before his own".
Domenicali's near seven-year reign featured a constructors title in his first year in charge but crucially no drivers' titles, with Felipe Massa going closest in 2008.
Alonso had to settle for second best to Red Bull's Sebastian Vettel in 2010 and 2012.
New technical rules introduced for Formula One cars this season has left Ferrari uncharacteristically playing catch-up to the likes of Mercedes who have won all three races in 2014.
Nico Rosberg started the ball rolling in Australia and Malaysia with Lewis Hamilton taking the honours in Bahrain.
After the Bahrain race in which Alonso and Raikkonen trailed in 10th and 11th a frustrated Domenicali admitted: "I don't like seeing our drivers fighting hard everywhere and then being unable to attack or defend on the straights."
Mattiacci joins the team with Alonso placed fourth in the drivers' title race with 26 points, 35 points behind leader Rosberg, and Raikkonen in 12th with a mere seven points.
The constructors' standings make equally grim reading for fans of the scuderia with Ferrari only fifth on 33 points behind leaders Mercedes on 111.
The next race is in China on Sunday.