The palace said in a statement this morning that the 49-year-old Sultan had resigned with immediate effect, cutting short his five-year term.
It comes after weeks of speculation about his future after he took a leave of absence and amid rumours he married a Russian former beauty queen.
Oxford-educated Muhammad V had taken a two-month leave of absence in November and was due back in office on January 1, but questions arose last week over whether he had returned.
Comptroller of the Royal Household, Datuk Wan Ahmad Dahlan Abdul Aziz said that His Majesty had officially notified the Malay Rulers on his abdication through a letter sent to the Secretary of the Conference of Rulers.
The monarch's role is largely ceremonial, since administrative power is vested in the prime minister and parliament.
Reports in British and Russian media then surfaced saying that he had married the former Miss Moscow in the Russian capital in a lavish ceremony.
Royal officials in Malaysia have so far not commented on the rumoured marriage, or given any details about his health condition.
Malaysia is a constitutional monarchy, with a unique arrangement where the throne changes hands every five years.
Kelantan ruler Sultan Muhammad V has chose to vacate his post as the 15th Yang di-Pertuan Agong effective today, according to a statement from Istana Negara.
Speculation had intensified about Sultan Muhammad V's future this week when the country's other royals reportedly held a special meeting.
Malaysia has nine royal households, who typically take turns to sit on the throne, and the selection of the next king is decided by a vote in the Council of Rulers, made up of all nine royal households.
Sultan Muhammad V studied at St Cross College at Oxford and the Oxford Centre for Islamic Studies, according to official media.
"His Majesty has expressed his thanks to the rulers who have chosen him as the 15th Yang di-Pertuan Agong from Dec 13, 2016".