Volkswagen chief executive Martin Winterkorn has resigned following the revelation that the firm manipulated US diesel car emissions tests.
Mr Winterkorn said he was "shocked" by recent events and that the firm needed a "fresh start".
He added that he was "not aware of any wrongdoing on my part" but was acting in the interest of the company.
VW has already said that it is setting aside €6.5 billion to cover the costs of the scandal.
The world's biggest carmaker admitted last week that it deceived US regulators in exhaust emissions tests by installing a device to give more positive results.
The company said later that it affected 11 million vehicles worldwide.
'Stunned' by scale of deceit
"I am clearing the way for a fresh start with my resignation," Mr Winterkorn said in his statement.
He said he was "stunned" at the scale of the misconduct in the group but that he was confident that VW would overcome this "grave crisis".
"The process of clarification and transparency must continue. This is the only way to win back trust," he continued.
In a separate statement, the supervisory board said they would announce Mr Winterkorn's successor at a board meeting on Friday, adding that it was "expecting further personnel consequences in the next days" as a result of its own investigations.
"The internal group investigations are continuing at a high tempo," it said.
"All participants in these proceedings that has resulted in unmeasurable harm for Volkswagen will be subject to the full consequences."
There has been speculation in German newspapers that Matthias Mueller would be named as the next chief executive. He is head of Porsche, which is part of the Volkswagen group of companies.
The board also said that it would voluntarily submit a complaint to the state prosecutors.
"In the view of the Executive Committee criminal proceedings may be relevant due to the irregularities," its statement said.
German public prosecutors have already said they are considering an investigation, with US authorities also said to be planning criminal investigations.
In addition, VW faces fines of up to $US18 billion by the regulator, the Environmental Protection Agency (EPA).
Volkswagen shares have tumbled some 30 percent since the beginning of the week in response to the scandal, which has stunned investors.