The more controversial elements Poindexter's project — developing a futures market on Mideast developments and scanning public and private databases loaded with personal information about innocent Americans — drew a hail of criticism from privacy advocates and politicians in both parties.
Poindexter said the project had been misrepresented and misunderstood.
"I regret that we have not been able to ... reassure the public that we do not intend to spy on them," the retired admiral wrote in a resignation letter to his boss, Anthony Tether. "I think I have done all that I can do under the circumstances."
Poindexter said he would leave the Defense Advanced Research Projects Agency on Aug. 29, almost 20 months after Tether lured him from private industry back to government service to pursue his ideas for improving anti-terrorism efforts.
Poindexter's previous government job was national security adviser to President Reagan during the Iran-Contra scandal in which arms were sold to Iran to finance Nicaraguan rebels when Congress had barred such aid.
Poindexter was convicted of lying to Congress in that affair, but an appeals court overturned his five felony convictions on grounds prosecutors could not prove they had not been aided by Poindexter's own testimony to Congress under a grant of immunity.
Poindexter disclosed that a less controversial element of his current project — improved sharing of existing intelligence data among government agencies — had in a recent test produced analyses in one-tenth the time previously required.
The Total Information Awareness project, renamed Terrorism Information Awareness after the criticism, also included non-controversial efforts to develop software to translate foreign-language documents and broadcasts.
The Senate version of the defense appropriations bill would cut off all funds for TIA; the House version would merely bar domestic use of TIA without specific congressional approval. Poindexter wrote that he hoped a House-Senate conference in September would agree to "permit a continuation of at least the non-controversial parts."
He acknowledged part of TIA was controversial: the effort to develop software that could scan public and private databases of the everyday commercial transactions and personal records of Americans and others around the world to find clues that terrorists were preparing an attack.
Poindexter said that it would have been "up to the policy-makers, Congress and the public at large — not DARPA — to decide whether to change law and policy to permit access to such data." He added that he sponsored research in how to protect privacy during the data-scanning.
He said his futures market project, known as FutureMap, was "distorted in press conferences and the media." But he added, "Admittedly, one of the contractors made this distortion possible by using some extremely bad examples that had not been approved."
The project was designed to let traders, political experts, speculators and others wager by buying futures contracts from one another over the Internet on the likelihood of various economic or political events in the Middle East.
A contractor's Web page listed as possible events for futures contracts the likelihood that Palestinian leader Yasser Arafat would be assassinated or Jordanian King Abdullah II would be overthrown.
Last month, Sen. Ron Wyden, D-Ore., called the plan "a federal betting parlor on atrocities and terrorism." Politicians of both parties condemned the project, and the Pentagon folded it the next day.
Poindexter's letter, dated Tuesday, was released Wednesday.