Mr Phoolka submitted his resignation to Speaker Rana KP Singh in Chandigarh on Tuesday.
His move follows directions from the Delhi Bar Council disallowing Mr Phoolka from contesting cases of the riot victims in various courts, saying that he held an "office of profit" as Leader of Opposition, due to which he enjoyed the rank and perks of a state Cabinet Minister.
The Aam Aadmi Party (AAP) will now have to choose a new legislature party leader.
Mr Phoolka had earlier said that he had asked party National Convenor Arvind Kejriwal to select somebody else as the legislature party leader and had suggested the names of Sukhpal Singh Khaira, Kanwar Sandhu and Aman Arora.
Having emerged as the second largest party with 20 legislators in the 117-member Assembly in the February elections, the AAP has got the post of the Leader of Opposition.
This was the first outing for AAP in the Punjab Assembly polls. It named Mr Phoolka as its leader in the house in March.