Brown verified rumours of Kelly's resignation while being interviewed by the BBC this morning, saying Kelly was resigning to spend more time with her family.
Speaking later at the Labour Party conference in Manchester, Kelly, a mother of four, said: "As well as a front line politician, I am also proud to be a mother and wife. To be able to hold these jobs, I have relied on the support of my husband and family.
"So I ask for your understanding when I say that I now owe it to my children and family to put them first. If I do not, then I know that this is something I will come to regret deeply."
The new transport secretary is expected to be unveiled by Brown in a cabinet reshuffle after the Conservative Party conference next week.
Kelly's replacement will be the third transport secretary in a little over two years, following the end of Alistair Darling's four year tenure in May 2006 and Douglas Alexander's brief spell between then and June last year.