In an interview with CNBC on Thursday morning, Mr Mulvaney announced he had submitted his resignation to Secretary of State Mike Pompeo on Wednesday night.
“I can’t stay,” he said. “I called Mike Pompeo last night to let him know I was resigning from that. I can’t do it. I can’t stay.
“Those who choose to stay, and I have talked with some of them, are choosing to stay because they’re worried the president might put someone worse in.”
Mr Mulvaney’s term as Northern Ireland envoy was due to come to a close with the election of Joe Biden.
He was appointed by Mr Trump earlier this year, after he left his role as White House chief of staff.
He visited Dublin, Belfast and London in September, after his first visit as envoy was delayed due to the covid pandemic.
While he had defended the president’s right to challenge the election results in recent weeks, he publicly broke with the president as violence unfolded at the US Capitol.
“Now is the time for the president to be presidential,” he wrote as protesters breached the Capitol building. “The President’s tweet is not enough. He can stop this now and needs to do exactly that. Tell these folks to go home.”
Mr Mulvaney is not the only appointee to resign in the wake of Wednesday’s scenes of anarchy at the US Capitol. Stephanie Grisham, a former press secretary and chief of staff to Melania Trump resigned over the events, despite her long-time links with the Trump family.
Deputy national security adviser Matt Pottinger also resigned.