The NSW government will launch a search for three new commissioners of the Independent Commission Against Corruption after Ms Latham leaves on November 30 to return to the Supreme Court bench.

Legislation passed by Parliament last week abolished Ms Latham's position in favour of a three-commissioner model and the government announced she would be "invited" to reapply for her job, despite having two years to run on her contract.

It follows an extraordinary period of close to three years for Ms Latham at the ICAC.

As commissioner, she presided over Operation Spicer, the investigation into Liberal Party fundraising before the 2011 state election, which ended the political careers of a number of Mr Baird's Liberal Party colleagues.

But she also saw the agency's jurisdiction redefined by the High Court after a controversial failed bid to investigate deputy senior Crown Prosecutor Margaret Cunneen, SC, for which she was heavily criticised by ICAC Inspector David Levine.

On Wednesday, Ms Cunneen declined to comment but was overheard at a Christmas lunch saying she was pleased "that vindictive woman" had resigned.

However, former assistant ICAC commissioner Anthony Whealy, who is chairman of Transparency International Australia, warned: "With the resignation of this fierce and independent woman who is devoted to the uncovering of corruption in NSW, our battle with corruption ... has been set back for years.

"This legislation was never about improving ICAC," he said.

"It was designed to attack its independence, it was designed to weaken its structures, and overall it was designed to get rid of a woman who dared to question the lack of integrity of parliamentarians. I think it's a day of utter shame for NSW."

Former ICAC commissioner David Ipp, whom Ms Latham succeeded, said Ms Latham was "compelled to resign" and her position was made "intolerable as a result of the legislation".

"Everybody thought she had security of tenure [under the ICAC Act]," Mr Ipp said.

"The government has shown that, despite what is in the legislation, if it wants to, it will get rid of any ICAC commissioner if they don't like what they're doing."

Opposition Leader Luke Foley said Ms Latham "has been forced from office by Mr Baird".

Mr Foley linked the decision to force Ms Latham to reapply for her job to her oversight of Operation Spicer.

"Today marks the lowest point in the fight against corruption in this state in the 28 years since ICAC was set up," he said.

"We have hit rock bottom. An ICAC commissioner has been sacked - forced from office - by the Premier of the state because the commissioner had the temerity to investigate corruption inside the governing party of the state. This is payback.

"The message this sends to every future ICAC commissioner, to all future commissioners, is do not dare investigate corruption inside the governing party of the state".

In a statement, Ms Latham said she was "grateful for the opportunity to have worked at the commission".

"I am particularly privileged to have observed first-hand the skill and dedication of the commission's staff who deserve great credit for the exposure of corruption in this state," she said.

She had previously accused Mr Baird of "an unprecedented attack" on the agency's independence and warned his changes would result in a "fundamentally weaker organisation".

Mr Baird thanked Ms Latham for her service to the community and said the government respected her decision not to reapply.

He said ICAC assistant commissioner Reg Blanch, a former chief judge of the NSW District Court, would become acting chief commissioner after Ms Latham's departure until the three new positions are filled.

The government is moving to a model with a chief commissioner and two part-time commissioners, which was the bipartisan recommendation of a parliamentary committee on the ICAC.

The chief commissioner and at least one other commissioner will have to agree before public or private hearings can be undertaken.

Mr Baird said neither his legislation nor Ms Latham's resignation would prevent the ICAC from continuing or reporting on current investigations, including Operation Credo.

Ms Latham presided over Operation Credo, which examined controversial infrastructure company Australian Water Holdings, which had links to both sides of politics and led to the resignation of then NSW premier Barry O'Farrell.

However, critics have suggested it would be practically difficult for a new chief commissioner who did not preside over the inquiry to make findings about the credibility of witnesses in a final report.

NSW Greens anti-corruption spokesman, Balmain MP Jamie Parker, said the resignation was "the logical conclusion of the government's long-running campaign to destabilise and undermine the state's top corruption fighting body".