The Speaker is meeting party leaders to discuss expenses reforms, shortly after announcing his resignation.
Centuries of self-regulation by MPs must end and an independent body set up to oversee Members of Parliament, Prime Minister Gordon Brown has said.
Michael Martin, who will stand down on 21 June, has already urged MPs to stop making claims until new interim rules is in place.
He said Westminster "can't operate like some gentlemen's club" in which MPs are "judge and jury" of "pay and rations".
Prime Minister Gordon Brown said earlier he would be proposing a "fundamental rethink" of the system.
It follows a meeting of party leaders about how to bring in interim changes to the much criticism expenses system.
The PM said an independent body would authorise claims under a new system agreed with fellow party leaders.
'Fundamental rethink'
It follows damaging revelations in the Daily Telegraph based on leaked receipts of MPs' claims.
It follows damaging revelations in the Daily Telegraph based on leaked receipts of MPs' claims.
In a brief statement to a packed Commons chamber at 1430 BST, Mr Martin said he would step down as Speaker to maintain "unity" in the House.
The proposal would mean the new Speaker would have a much different role, BBC political editor Nick Robinson said.
It followed unprecedented scenes in the Commons on Monday when a succession of MPs stood up to challenge him - he has been criticised for his handling of the expenses scandal and accused of defending the status quo.
The Speaker met party leaders to discuss expenses reforms, shortly after announcing his resignation.
The meeting organised by Mr Martin for all party leaders is intended to thrash out immediate proposals to reform the allowances system - ahead of the findings of an independent review, due in the autumn.
Michael Martin, who will stand down on 21 June, has already urged MPs to stop making claims until new interim rules is in place.
Mr Martin told MPs on Monday: "While we await the outcome of his work, it is imperative that we continue to improve our accounts and practice in the interim and get in place measures that work and are seen to be working."
The meeting organised by Mr Martin for all party leaders was intended to thrash out immediate proposals to reform the allowances system - ahead of the findings of an independent review, due in the autumn.
Threshold cut
The Speaker would announce the full detail of the proposals to the Commons within the next few hours, Mr Brown said.
But a meeting of party leaders on the same issue several weeks ago failed to reach agreement.
Mr Brown's announcement in a video on the Downing Street website and YouTube that he wanted to scrap the second homes allowances and replace them with a daily attendance allowance instead was widely criticised.
He, Conservative leader David Cameron and Lib Dem leader Nick Clegg failed to reach an agreement and he had to drop the proposals the following week.
However MPs did vote through some changes to the second homes allowance - including stopping MPs in greater London from claiming it and reducing the threshold for claims which required receipts from £25 to zero.
Earlier Mr Brown said he would propose "a fundamental rethink of the system, a root and branch reform" and said changes would happen "very soon".
"I will be proposing major changes in the way the whole system operates. And I believe the system that will emerge over the next few weeks is quite different from what we've had."
Mr Brown is expected to give a news conference at 1730 BST.
