Democratic officials said they would announce a new candidate within 48 hours. The Republicans said they would file an immediate court challenge to block any attempt to replace Torricelli this close to the election.
"I will not be responsible for the loss of the Democratic majority in the United States Senate. I will not let it happen. There is just too much at stake," said Torricelli, at a sometimes teary news conference in Trenton.
A weekend poll showed Torricelli was lagging 13 points behind his Republican opponent Doug Forrester after leading comfortably earlier in the year.
Torricelli, 51, who was seeking a second term, spent all day talking with party leaders about possible replacements and researching the legal issues involved in getting a new candidate on the Nov. 5 ballot.
Party officials were considering a list of possible candidates including former Sens. Frank Lautenberg and Bill Bradley and current House members Bob Menendez, Frank Pallone and Rob Andrews, according to sources in Washington and New Jersey.
An associate said it was unlikely Bradley would accept. A source close to Lautenberg said he would run if asked by Gov. Jim McGreevey, a fellow Democrat.
Under New Jersey law, a political party can replace a statewide nominee on the ballot if the person drops out at least 48 days before the election. But only 36 days remain until the election, meaning Democrats would have to seek approval from the state attorney general, a Democrat.
Republicans seem to agree another candidate might do better because they are crying foul, saying New Jersey law doesn't permit such a late switch on the ballot and they'll go to court to stop it, reports CBS News Correspondent Bob Fuss.
"This is a cynical attempt by party bosses to manipulate democracy," said Mitch Bainwol, executive director of the Senate GOP campaign committee.
Torricelli was admonished over the summer by the Senate Ethics Committee, which investigated allegations that he had accepted gifts from David Chang, a businessman that the lawmaker aided. He took a fresh hit last week with the release of a prosecutor's memo saying Chang had made credible accusations of wrongdoing against him.
The senator swiftly launched an effort to apologize to the state's voters, but his Republican rival, Doug Forrester, has capitalized on the issue and polls show him leading.
Torricelli was elected to his seat in 1996, and quickly made clear his leadership ambitions. He helped raise more than $100 million for the Democratic Senatorial Campaign Committee as its chairman in the last election cycle.
That was before Chang's allegations of illegal gift-giving began to take a toll.
Seven people pleaded guilty to making illegal donations to Torricelli's campaign in 1996. Chang told investigators he gave the senator Italian suits and a $8,100 Rolex watch, among other gifts, in return for Torricelli's intervention in business deals in North and South Korea.
Torricelli has denied any illegality or violations of Senate rules.
The government investigated the allegations against the senator, but brought no charges. But the ethics committee issued its admonishment, and Torricelli's poll numbers began dropping rapidly.
Torricelli was a powerhouse fund-raiser: He helped raise more than $100 million for the Democratic Senatorial Campaign Committee as its chairman in the last election cycle.
"Don't feel badly for me," Torricelli said at the news conference. "I've changed people's lives. I'm proud of every day of it, and I wouldn't change a bit of it."