Debbie Wasserman Schultz's move follows a leak of emails appearing to suggest that party insiders tried to thwart the campaign by Hillary Clinton's rival.
Bernie Sanders had pressed for the party chairwoman to step down.
Mrs Clinton is to be officially nominated at the Philadelphia meeting.
The Vermont senator had said Ms Wasserman Schultz "should not be chair" of the Democratic National Committee.
"And I think these emails reiterate that reason why she should not be chair," he told ABC's This Week programme.
In a statement, Ms Wasserman Schultz said she would "step down as party chair at the end of this convention."
"We have planned a great and unified convention this week and I hope and expect that the DNC team that has worked so hard to get us to this point will have the strong support of all Democrats in making sure this is the best convention we have ever had," she said.
Mr Sanders and his supporters have also expressed disappointment at Mrs Clinton's choice of Virginia Senator Tim Kaine as her running mate, preferring someone further to the left.
But Mr Sanders did say: "I have known Tim Kaine for a number of years... Tim is a very, very smart guy. He is a very nice guy."
Mrs Clinton's campaign received a boost on Sunday with the announcement that Michael Bloomberg, who was elected New York mayor as a Republican, will speak to endorse her this week.
The Democrats' four-day convention starts on Monday, with speeches by First Lady Michelle Obama and Mr Sanders.
It comes just after the Republican convention that saw Donald Trump declared the Republican presidential nominee.