Richard A. Grasso resigned yesterday as chairman and chief executive of the New York Stock Exchange after three weeks of blistering criticism of his pay package.

Mr. Grasso had a remarkable rise at the exchange, from a clerk earning $82.50 a week in 1968 to its top executive in 1995. When it was announced last month that he would receive $139.5 million in deferred pay and retirement benefits, a furor erupted as critics noted that he was not just a market leader but a regulator whose pay was set by some of the people he oversaw. The outrage over his pay threatened to engulf the exchange itself.

Under pressure from the board and after several public pension funds Tuesday called for him to leave, Mr. Grasso offered his resignation yesterday in a hastily arranged telephone meeting with directors that began after the markets closed and lasted for two hours. A heated discussion among the directors ensued, with 13 of the 20 participants ultimately voting to accept Mr. Grasso's resignation. The seven other directors on the call opposed the resignation of Mr. Grasso.

``I believe this course is in the best interest of both the exchange and myself,'' Mr. Grasso said in a statement, adding that he was leaving ``with the deepest reluctance.''

Unlike many executives whose pay has drawn fire in recent years, Mr. Grasso has been applauded for his management, including his strong leadership and ability to reopen the markets after Sept. 11.

``This will be the first time in American history where someone who is said to have done a good job is being fired because the board is paying him too much,'' said Jeffrey A. Sonnenfeld, associate dean of the Yale School of Management. ``The board's accountability is the second issue to be dealt with.''

While Mr. Grasso's exit from the exchange will help it quiet the compensation controversy and get back to the business of trading stocks, his departure will by no means put an end to investor scrutiny of the Big Board and its practices.

Indeed, his resignation may bring significant change to the Big Board, under pressure from critics who may seize on weakness at the institution. For years, they have complained about what they call the exchange's obsolete trading platforms, secrecy in its operations and potential conflicts of interest in its dual role of regulator and protector of member firms.

The board of the exchange is already considering additional changes in the composition and selection of its members to achieve more independence and represent investors. After Mr. Grasso's resignation was announced, Laura Cox, managing executive for external affairs at the Securities and Exchange Commission, said: ``The S.E.C. will continue its review of governance standards and will work closely with the new leadership at the exchange to put an appropriate structure in place that will ensure the credibility and integrity of the governance of the exchange.''

The seeds of Mr. Grasso's downfall were sown with the disclosure of an employment contract struck in August that provided payments totaling $139.5 million in deferred compensation, savings and pension benefits. Exchange officials said that Mr. Grasso accumulated the sum by deferring significant components of his pay during his 20 years as an executive at the exchange.

Less than a week after the pay package was disclosed, William H. Donaldson, chairman of the Securities and Exchange Commission, wrote a letter to the Big Board demanding details of Mr. Grasso's compensation. ``In my view, the approval of Mr. Grasso's pay package raises serious questions regarding the effectiveness of the N.Y.S.E.'s current governance structure,'' Mr. Donaldson wrote to H. Carl McCall, the new chairman of the Big Board's compensation committee.

The firestorm over Mr. Grasso only escalated as politicians and pension fund managers said he had lost credibility. To demonstrate his desire to change the exchange's governance practices, Mr. Grasso called a meeting of all 26 members of the board for next Wednesday to discuss a set of proposals.

But as the clamor grew, the directors of the Big Board agreed to a telephone meeting yesterday.

Mr. Grasso began his final day at the stock exchange by calling a handful of directors who had supported him or who were undecided about his future to gauge their opinions, said a director who insisted on anonymity. Several of the directors said they advised him gently to resign. The final straw seemed to come at around 1 p.m. in a telephone conversation with a director who suggested that Mr. Grasso put the interest of the exchange before his own.

On the conference call with directors yesterday, Mr. Grasso said that he would be prepared to resign if asked by the board, saying that he had always put the exchange's interest ahead of his own. The board then went into executive session, with him absent, and voted to accept Mr. Grasso's resignation.

Those favoring his departure were a group of Wall Street chief executives who have been critical of Mr. Grasso's pay package since it was disclosed. They included Henry M. Paulson Jr. of Goldman Sachs, William B. Harrison Jr. of J.P. Morgan Chase and Philip J. Purcell of Morgan Stanley. H. Carl McCall, the co-chairman of the corporate governance committee and the former comptroller of New York State, also voted with this group, according to several directors.

These directors also said that Mr. Grasso's exit was opposed by Kenneth G. Langone, a longtime friend of Mr. Grasso and a member of the compensation committee when his biggest contract was approved; William B. Summers Jr., the chairman of McDonald Investments, and James E. Cayne, the chief executive of Bear Stearns.

After the vote, with Mr. Grasso back on the phone, Mr. McCall told Mr. Grasso that the board would accept his resignation.

The board held a follow-up meeting late last night and announced that Mr. McCall would become the chief spokesman for the board and continue as the lead director. It had been widely expected that Larry W. Sonsini would be named interim chairman. At the meeting, however, directors decided that it would be premature to appoint an interim chairman while many crucial corporate governance matters remain unclear.

For the time being, directors said yesterday, Robert G. Britz and Catherine R. Kinney would continue in their posts as co-presidents of the exchange.

Even as Mr. Grasso was phoning directors yesterday morning to get a sense of their thinking, lawmakers in Washington were questioning the management of the exchange. At a Congressional hearing, Mr. Donaldson was pressed for his views on Mr. Grasso's tenure. Mr. Donaldson declined to say whether Mr. Grasso should step down or whether any broader structural changes should be imposed on the exchange but said that the commission would soon be sending additional questions to the exchange about Mr. Grasso's compensation.

``I was upset by the disclosure as were my fellow commissioners, but we need to look at this in the context not of personalities, but procedures,'' Mr. Donaldson told the House Financial Services Committee.

While the House committee discussed Mr. Grasso, Senator Joseph I. Lieberman of Connecticut became the first lawmaker and presidential candidate to call on Mr. Grasso to step down. ``Instead of setting an example of ethical leadership for the market he oversees, Mr. Grasso's behavior has shaken the faith of investors and the foundation of the stock exchange,'' Mr. Lieberman said in a statement. ``For the sake of confidence in the market, it is time for Mr. Grasso to resign.''

Another Democratic presidential candidate, Senator John Edwards of North Carolina, issued a similar statement later in the day.

Officials at the S.E.C. said Mr. Grasso's departure would have no effect on its review of the exchange. The commission is considering whether to force the exchange to change its structure and separate the regulatory unit from the trading floor.

During his years at the exchange, Mr. Grasso worked hard to burnish its image as an icon of United States capitalism and as a place where even the smallest investor can buy a share of the American dream and be treated fairly.

During the bull market in stocks that swept the nation during the late 1990's, Mr. Grasso became the public face of the exchange. By inviting celebrities like Muhammad Ali, Walter Cronkite and Hank Aaron to ring the opening bell that starts each day's trading activity, Mr. Grasso brought glamor to the relatively arcane operations of the 211-year-old institution.

Raised in Jackson Heights, Queens, by a single mother and two maiden aunts, Mr. Grasso rose to the heights of American capitalism without a college degree. His story is one of grit and an uncanny ability to ingratiate himself with some of the country's most powerful corporate executives.

Mr. Grasso was the first president in the exchange's history who worked his way up through its ranks. When he became an officer of the exchange, he called his mother to give her the news, said a friend of his. She replied that if he had listened to her and joined the police department, he would be a sergeant by now. He never worked anywhere else.

In a remarkable transformation over 35 years, Mr. Grasso evolved from a low-level technician to an elder statesman of the financial world. Under his leadership, the Big Board's power and prestige grew even though its old-fashioned trading practices were under threat from technologically advanced platforms. His behind-the-scenes work to open the exchange for trading six days after the terrorist attacks of Sept. 11 made him a national figure. And his role last year brokering the peace between warring regulators investigating Wall Street conflicts of interest earned him additional respect.

But even as his stature rose, Mr. Grasso failed to realize that his statesman role required him to be beyond reproach in his activities and in those of the institution. Nevertheless, he joined boards of companies whose shares were traded on the exchange, setting up a potential for conflicts of interest. For example, he was a director of Computer Associates, whose accounting was the subject of an S.E.C. investigation and whose executive compensation was criticized by shareholder advocates as outsized.

Another misstep came last March when the exchange board nominated Sanford I. Weill, the chairman of Citigroup, to join as a public representative. Mr. Weill withdrew after Eliot Spitzer, the attorney general of New York, vowed to oppose the nomination because Citigroup had just agreed to pay $400 million in penalties as part of a broad settlement between regulators and major brokerage firms.

And while the Big Board instituted new and tougher governance standards for the companies whose shares it trades, the exchange did not hold itself to such standards. It has since said that it would do so,

``Grasso's resigning goes a long way to resolving corporate governance issues at the exchange, but it takes two to tango,'' said Charles M. Elson, the director of the Weinberg Center for Corporate Governance at the University of Delaware. ``The board has a lot of soul-searching to do. It is clear that the reputation of the exchange has been damaged.''