RSL NSW president James Brown is stepping down from the unpaid role to contest the position of chief executive at the organisation.
Mr Brown has served as president since 2017, and also as director of the board.
He said he has been working full-time as a volunteer at the expense of other professional employment.
"While it has been an absolute privilege to represent you and work to repair RSL NSW, for a veteran with a young family it is not sustainable in the long term," he said in a statement on Thursday.
"I have made the decision to apply for the paid role of CEO. Accordingly, and appropriately, I have resigned as president and chairman in order to contest the merit-based selection process."
The embattled organisation has been through a "significant period of upheaval - the most challenging in our 102-year-history," Mr Brown said.
The RSL NSW board said it accepted Mr Brown's resignation "with a heavy heart", noting he had helped unite the organisation and restored its reputation during his tenure.
RSL NSW has been going through significant reform since allegations of misconduct were raised during a public inquiry in 2017.
"James commenced his volunteer service in 2017 during the Bergin Inquiry and capably led RSL NSW through a period of unprecedented crisis," acting president Ray James said.
Former state president Don Rowe is before the courts on fraud charges arising from the inquiry, but has indicated he will fight the accusations.
Mr Brown's application for the role of CEO will be treated the same as all others submitted, Mr James said.
The board hopes to call an election in early 2020.
Australian Associated Press