The allegations, made by a female employee of the refugee agency in Geneva, were investigated by the United Nations last summer, but Annan decided at the time there was insufficient proof for action against the former Dutch premier.
A 51-year-old American alleged Lubbers groped her as she was leaving his office in Geneva after a meeting late in 2003.
On Friday, the United Nations let it be known after a long-scheduled meeting between Annan and Lubbers in New York that the case was not over and that Lubbers' future as High Commissioner for Refugees was in doubt.
Annan, in his own statement, said the controversy swirling around Lubbers had made his position untenable as head of the large UN refugee agency, which looks after the world's 17 million refugees with a budget of some $1 billion a year.
He thanked Lubbers for his "devotion and commitment" and said he was pleased he had made the decision to resign "in the wider interest of UNHCR".
Annan said he had accepted legal advice last summer that the original allegations against Lubbers could not be substantiated. But he said that "the continuing controversy has made the high commissioner's position impossible".
The meeting on Friday between Lubbers and Annan coincided with publication for the first time of details of the allegations by a British newspaper, The Independent. "Now, in the middle of a series of problems and with ongoing media pressure, you apparently view this differently," Lubbers, who has always insisted on his innocence, told Annan.
"Despite all my loyalty, insult has now been added to injury and therefore I resign as high commissioner."