Lynch offered to resign in mid-May but team president Andy MacPhail thought it would be better to wait until the All-Star break to see if the season could be saved.
Things didn't improve, the team slipped farther behind in the NL Central and also became embroiled in a Sammy Sosa trade soap opera.
On Wednesday, MacPhail accepted Lynch's resignation and will now assume the GM duties himself, less than two weeks before the trade deadline.
"It was a development that evolved over time," MacPhail said. "It was easy to see his frustration. I was frustrated along with him. So it really wasn't a surprise."
The Cubs made the playoffs in 1998 as the NL wild card, riding Sosa's sensational 66-homer season, the pitching of Kerry Wood and the leadership of veterans like Gary Gaetti, Mickey Morandini and Rod Beck.
The Cubs decided to stick with those veterans the next season. And even with Wood out for the season following elbow surgery, they rolled to a 32-24 start in early June. Then came a startling collapse that hasn't been halted.
They won only 35 games the final four months of 1999. And this year; despite new manager Don Baylor and the acquisition of Eric Young, Damon Buford, Ismael Valdes, Joe Girardi and Ricky Gutierrez; they were just 39-53, 14 1/2 games behind St. Louis in the NL Central, headed into Wednesday night's game.
"I don't know when the downfall began," Lynch said. "Coming off the '98 season we felt we had players who could continue to be productive. ... And they were in June - we had the fifth-best record in baseball. Then the bottom just fell out, but I didn't view that as the beginning of the end."
Lynch termed the Cubs' dismal play for the last year "an equal opportunity failure in a lot of ways." The relief pitching, the starting rotation and the hitting never seemed to be in sync. If one was good, the other was awful.
"We just never clicked. Across the board at one time or the other we've had problems in every facet of the game," Lynch said, adding he couldn't fire a manager like Jim Riggleman, as he did last year, and not hold himself accountable, as well.
"For me to do anything different would be hypocritical," he said. He said the Sosa situation, in which the star outfielder was almost traded during a two-week stretch of constant rumors, did not affect his decision to resign.
"Sammy and my decision are totally separate," he said.
Lynch will help the Cubs with major league scouting this season and be involved in their Arizona fall league and instructional league operations next year.
MacPhail, who as a GM in Minnesota led the Twins to World Series titles in 1987 and 1991, had given Lynch a contract extension in November 1998 that runs through 2001.
MacPhail will keep the GM job through next season.
"Either it's going to be me or it. I'm going to get it done or it will kill me," he said.
Lynch, a former major league pitcher with the New York Mets and the Cubs, was hired in October 1994 as general manager and given the title of vice president/general manager in 1998. The Cubs have had two seasons above .500 since he was hired.
"It always gets back to what's on the field. It's no different when you are a manager getting fired. Someone has to be held accountable," said Baylor, who was fired as Colorado's manager after the 1998 season.
"We can't piece things together anymore. That's the responsibility of everybody in the organization."
Sosa said he was sorry to see Lynch leave.
"It's sad and I feel bad for him," Sosa said. "The time he was here for me, he was a great guy. There is nothing bad I can say about him."
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