Jackson offered to resign during a club board meeting on Thursday, which the board accepted.
As a player Jackson had two stints at the Bantams, making 336 appearances in a total of 10 years at the club.
Following his retirement from playing in 1997, another former club, Huddersfield Town, offered him his first managerial post.
He was sacked in 1999 to make way for Steve Bruce but was re-appointed four years later, where he won promotion from the old Division Three in his first season back in charge.
In 2007 he became manger of League Two side Lincoln City when they were bottom of the Football League.
Five months later however, Jackson was diagnosed with throat cancer, which left his assistant Offy Onuora in charge until the following January, but the managerial team were sacked in September following a run of bad results.
Did you know?
Jackson was promoted twice with Bradford City as a player, first in 1982 and then in 1985.
After Peter Taylor left Bradford in February this year, Jackson was placed in interim charge of the side, leading them to four wins in 14 games and an 18th-place League Two finish last season.
This success meant that Jackson was given the job on a permanent basis earlier this summer, but with his side without a win this season, he handed in his resignation to the Bradford City board.
Jackson is the first manager in the top four divisions to relinquish his position this season.
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