His resignation comes as the two candidates to succeed President Hamid Karzai as Afghanistan's next president -- Abdullah Abdullah and Ashraf Ghani -- spar over alleged fraud in the elections.
The crisis threatens the country's first democratic transfer of power in 13 years, and tarnishes US hopes of a smooth handover as it prepares to withdraw all its troops by late 2016.
"His relationship with President Karzai was invaluable, particularly at difficult moments, and he departs at a time when both of Afghanistan's presidential candidates have been unwavering in their commitment to sign the BSA.
"I am grateful for his service and look forward to his counsel in the months ahead," Kerry said.
After Karzai refused to sign the deal, both Abdullah and Ghani said they would honour the negotiations and accept the bilateral security agreement.
Dobbins, who came out of retirement to take charge in May 2013, has been leading talks to draw up a security pact (BSA) to safeguard US troops staying in Afghanistan beyond 2014.
US President Barack Obama announced in May that US forces would complete their withdrawal from Afghanistan in 2016, bringing to an end more than a decade of war that followed the 2001 US invasion to oust the Taliban government.
The 32,000-strong US deployment in Afghanistan is to be brought down to around 9,800 by the start of 2015.
Dobbins "has played an outsized role on the ground negotiating the BSA, making preparations for historic elections, growing our counterterrorism cooperation with Pakistan, and planning for a transition for the Afghan people after more than a decade of progress," Kerry said.
Dobbins stayed in the position for over a year and will be replaced by Daniel Feldman.
Lauding his contribution, Kerry said : "Jim (Dobbins) cut his teeth as a young Foreign Service officer working the Paris Peace Talks during the Vietnam War, played a vital role in the Balkans, and is forever known as the guy who raised the first flag over our Embassy in Kabul after the fall of the Taliban."
"He is simply one of the finest foreign service officers of his generation, a man who has dedicated his life to public service and earned respect throughout the region and in
Washington. He has been at the forefront of our work in Afghanistan and Pakistan," he said.
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