It is understood Mark Mitchell and Christopher Luxon are the candidates to replace her.
Collins confirmed she had lost the leadership in a tweet this afternoon.
"I am pleased to say that I am just the MP for Papakura again. It's been a privilege to take over the leadership of the National Party during the worst of times and to do so for 16 months," she said.
"It has taken huge stamina and resolve, & has been particularly difficult because of a variety of factors. I knew when I was confided in by a female colleague regarding her allegation of serious misconduct against a senior colleague, that I would likely lose the leadership by taking the matter so seriously."
"If I hadn't, then I felt that I wouldn't deserve the role. I didn't ask for the allegation to be given to me. I am proud of the support I received from Dr Shane Reti, a man of principle, and I will continue to advocate, not only for Papakura, but for those who have no voice," she said.
National MP Stuart Smith said current deputy Shane Reti was now the interim leader.
The deputy leader role will remain vacant for now.
Smith said he didn't know who he would back as the new leader as he would need to know the candidates first.
"It's a sad day for Judith and I just wish it hadn't happened," Smith said.
National MPs met behind closed doors for more than three hours, where Collins faced a vote of no confidence after her "deeply disrespectful" decision to demote Simon Bridges.
Collins was leader for 16 months since July 14, 2020 when she replaced Todd Muller.
She lost the leadership 12 hours after publicly announcing that she had demoted Simon Bridges - a decision that has spectacularly backfired and cost her the top job.
Today's crisis caucus meeting began at 9am and was prompted by Collins' shock announcement last night that she had demoted Bridges over a comment he made to fellow MP Jacqui Dean about five years ago.
MPs emerged for a short "water" break just before 10.45am.
Several MPs had publicly declared today that Collins was not fit to remain as National's leader - with Bridges attacking her actions as "truly desperate".
It is understood Collins' leadership was in dire straits going into the meeting, with a majority of MPs believed to be in favour of dumping her.
Bridges himself may not go for the leadership today but some MPs want deputy leader Shane Reti to stay on as acting leader for a period of about 48 hours to allow more time for MPs to consider the issue.
Asked to comment on National's leadership crisis, Prime Minister Jacinda Ardern said it was an internal matter for them.
"We're in the middle of a global pandemic and so my focus needs to be on managing that."
A timeline of the complaint emerges from National sources
The complaint was laid at the time of the event, about five years ago. Dean made the complaint to Jami-Lee Ross who was National's whip at the time.
Dean also went to Bill English over the complaint. English was deputy prime minister at the time. The matter did not get escalated to then Prime Minister John Key.
Ross organised an apology from Bridges to Dean and the complaint was not escalated to the Prime Minister.
The apology was, at the time, considered to have been sufficient and Dean backed Bridges in subsequent leadership contests.
Camp Collins said that last week the complaint was made again to the leadership. Collins' press release claimed this was the first time she had heard of the complaint.
The leadership was told last week that Bridges' apology was not considered to have been sufficient.
Collins supporters said at some point this week - "days ago" - National's deputy leader Shane Reti went to Bridges saying the complaint had resurfaced, and asking for it to be addressed.
Bridges was told that he could speak to either Collins or Reti about it. Bridges chose to speak to neither.
National's board then met yesterday. There have been conflicting reports about what the board resolved to do, with Collins' late-night press release claiming she had the "unanimous" support of the board - however several other sources have alleged the board was divided.
