The 78-year-old businessman and executive, who is a well-known figure within the sport, has resigned one day after a former employee filed a lawsuit against him.
This accused McMahon and another former executive of serious sexual misconduct, including offering her to a star wrestler for sex.
McMahon stepped down from his position as executive chairman of the board of directors at WWE's parent company, TKO Group Holdings, according to a statement released late on Friday.
He continued to deny wrongdoing following the lawsuit filed by Janel Grant, who worked in the company's legal and talent departments.
The suit includes allegations that he forced Ms Grant into a sexual relationship in order for her to get and keep a job and passed around pornographic pictures and videos of her to other men, including other WWE employees.
Ms Grant's representatives have said she wished to go public with her identity. Her lawyer declined to comment on Friday.
McMahon's statement said that he was leaving the board "out of respect" for WWE and TKO Group.
"I stand by my prior statement that Ms Grant's lawsuit is replete with lies, obscene made-up instances that never occurred, and is a vindictive distortion of the truth," he said in the statement. "I intend to vigorously defend myself against these baseless accusations, and look forward to clearing my name."
McMahon stepped down as WWE's chief executive in 2022 amid an investigation into allegations that match those in the lawsuit, which was filed on Thursday in US District Court in Connecticut, where WWE is based.
McMahon was the leader and a recognisable face at WWE for decades. When he purchased what was then the World Wrestling Federation from his father in 1982, wrestling matches took place at smaller venues and appeared on local TV channels.
WWE matches are now held in professional sports stadiums, and the organisation has a sizable overseas following.
WWE merged last April with the company that runs Ultimate Fighting Championship to create the 21.4 billion dollar (£16.84 billion) sports entertainment company TKO Group Holdings, and McMahon served as that group's executive chairman of the board until Friday.
TKO Group's representative referred media inquiries about Mr McMahon's resignation to his statement. Deadline first reported that he was stepping down.
— Vince McMahon (@VinceMcMahon) July 22, 2022
According to the lawsuit, Mr McMahon lived in the same building as Ms Grant and in 2019 offered to get her a job at WWE after her parents died.
She alleges that he eventually made it clear that one of the requirements of the job was a physical relationship with him and later with Mr Laurinaitis and others.
Over the next few years, McMahon lavished her with gifts including a luxury car, the suit says.
It also alleges that McMahon offered one of his star wrestlers - a person not named in the lawsuit - sex with Ms Grant as a perk in 2021.
"WWE benefited financially from the commercial sex act venture orchestrated by McMahon, including by having wrestling talent, such as WWE Superstar, sign new contracts with WWE after McMahon presented Plaintiff as a sexual commodity for their use," the lawsuit states.
Ms Grant is seeking unspecified monetary damages and to have the court void a 3 million dollar (£2.36 million) non-disclosure agreement, of which she alleges she received only 1 million dollars (£790,000).
"Ms Grant hopes that her lawsuit will prevent other women from being victimised," her lawyer, Ann Callis, said in a statement on Thursday.
"The organisation is well aware of McMahon's history of depraved behaviour, and it's time that they take responsibility for the misconduct of its leadership."