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"Recent poll results have been disappointing. As leader, I must take responsibility for these results," Mr Little said.
Deputy leader Jacinda Ardern is seen by analysts as a clear favourite to succeed him.
New Zealand is due to hold the elections on 23 September.
Announcing his resignation, Mr Little, 52, said he hoped a fresh leadership team could boost the centre-left party's campaign ahead of the elections.
Recent opinion polls show that the party's support has dropped to about 23-24% - the worst in many years.
Mr Little led the Labour Party for nearly three years.
New Zealand is currently governed by the centre-right National Party-led coalition under Prime Minister Bill English.