Germany's Der Spiegel news magazine and Süddeutsche Zeitung daily newspaper published video on Friday of Strache appearing to offer government contracts to a woman who claims to be a Russian investor and niece of an oligarch.
During a press conference Saturday morning, Strache denied doing "anything against the law" but said he would step down as head of the Freedom Party.
"I want to apologize to everyone I have disappointed with my behavior," Strache said.
It is not known who recorded the video or who set up the meeting, which allegedly took place on July 24, 2017, on the Spanish island of Ibiza before the Austrian elections on October 15, 2017.
Der Spiegel and Süddeutsche Zeitung report the "Russian" woman offers to buy a 50% of Austria's Kronen-Zeitung newspaper and make it support Strache's Freedom Party.
Strache admitted to meeting the woman and described it as a "private conversation" in Ibiza. He said he was "drunk" but "no donations have been made to the party" as a result of the meeting.
"It was a typical alcohol infused macho behaviour.... With this I have hurt the most important person in my life, which is my wife," Strache said.
He labelled it "a targeted political attack" but refuted doing "anything against the law."
Strache said Austria's Chancellor Sebastian Kurz has accepted his resignation. Transportation Minister Norbert Hofer, who ran for President in 2016, is expected to take over from Strache as head of the Freedom Party.
Kurz is expected to speak at 2pm local time.
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