Slipper had agreed to stand aside from his parliamentary duties since April over a Federal Court suit that alleges he sexually propositioned his gay media adviser James Ashby.
Slipper denies the allegation, but has apologized for recently released text messages he admits he sent to Ashby which have been described as vulgar and misogynist.
"I leave this position without rancor and with a great deal of sadness," Slipper told Parliament.
With Labor lawmaker Anna Burke elected to replace him, Gillard has now become reliant on Slipper as one of seven independent and minor party lawmakers to pass her legislative agenda. Labor holds 71 seats including the speaker while the opposition holds 72 in the chamber.