"I have decided to resign from my executive chairmanship and the TKO board of directors, effective immediately," McMahon said in a statement released by TKO.
The suit by a former employee, filed on Thursday in federal court in Connecticut, accuses McMahon, WWE and another executive of "physical and emotional abuse, sexual assault and trafficking at WWE," and seeks unspecified costs and damages.
McMahon denied the allegations in the statement, saying, "I intend to vigorously defend myself against these baseless accusations, and look forward to clearing my name."
WWE President Nick Khan wrote in a memo to employees that McMahon "will no longer have a role with TKO Group Holdings or WWE."
McMahon had retired from WWE in 2022 amid allegations of misconduct and paid $17.4 million to the company to cover costs related to an investigation into that case. He returned in January 2023.
The powerhouse behind the wrestling entertainment company, McMahon transformed it from a regional player in a highly fragmented industry of the 1980s to a global giant, with about $1 billion in revenue in 2021.
He used scripted matches, celebrity wrestlers and glitz to make the brand more acceptable to television audiences, and created the concept of pay-per-view matches for bigger events such as WrestleMania to build its revenue base.
TKO was formed last year when McMahon forged a deal between WWE and Endeavor Group-owned mixed martial arts franchise UFC.
