The announcement came late last night, a week after the company's major November sales in New York and release of interim results.
The official release declared the decision was reached by mutual agreement with the board, adding that Mr Ruprecht, who has served as CEO since 2000, will continue as Chairman, President and CEO until his successor is in place "to ensure a smooth transition".
A committee led by Domenico De Sole, Lead Independent Director, on the board, have already started the search for a new CEO.
"We are moving with a sense of urgency but we will take the time we need to find the right leader for Sotheby's at this critical juncture in its continuing evolution," he said.
The news of Mr Ruprecht's resignation caps what has been seen as a shift of power towards hedge fund billionaire Dan Loeb of Third Point, who joined the board along with two other of his nominees following the settlement of a highly public spat with Mr Ruprecht over the management of the company, during which Mr Loeb called for Mr Ruprecht to resign.
The latest set of company results showed that Sotheby's had spent over $20m on fending off Mr Loeb's attack, along with that of other shareholder activists.