Deputy leader Chousak Sirinil will take the party reins until a new leader and executive board is elected at a general meeting scheduled in the next 60 days.
Cholnan, 62, told a press conference at party headquarters on Wednesday evening that he was making good on his April 28 promise to quit, after Pheu Thai formed an 11-party government coalition that includes Phalang Pracharath.
Phalang Pracharat is led by outgoing deputy PM General Prawit Wongsuwan while UTN nominated outgoing prime minister General Prayut Chan-o-cha as its PM candidate.
Pheu Thai initially formed an alliance with Move Forward but dumped the election winner after its leader, Pita Limjaroenrat, was blocked from becoming PM by the junta-appointed Senate and conservative MPs.