Investigators for the attorney general and the San Diego County Sheriff's Department have interviewed some of the women who have accused Filner of unwanted touching and suggestive comments.
A source familiar with the situation said that Filner could face felony or misdemeanor charges of assault and battery, false imprisonment or other crimes.
In an emotional and defiant address to the council after the 7-0 vote was announced, Filner apologized to his victims and supporters but also said he had been victimized by "the hysteria of the lynch mob" caused by politicians and the media once the allegations by some 18 women became public.
"I faced lynch mobs many times when I was younger," Filner said, a reference to his activism in the 1960s as a Freedom Rider in the segregated South when he spent two months in a Mississippi jail.
The resignation is effective Aug. 30.
"This settlement is an end to our civic nightmare and allows this city to begin to heal," said Council President Todd Gloria, one of two council members who negotiated for three days with Filner, his attorneys and the city attorney that resulted in the deal.
The attorney's general office and the Sheriff's Department are working in tandem on the criminal investigation. The district attorney's office has opted out of any investigation of Filner because Dist. Atty. Bonnie Dumanis ran against Filner in last year's mayoral election.
Filner's resignation does not affect the investigation, a source close to the investigation said.
Filner, 70, was elected in November as the city's first Democratic mayor in two decades.
When he entered the council chambers after the vote was announced, his supporters stood and applauded, but council members, all of whom had called for Filner to resign, sat without emotion.
He repeated his previous apologies to the city and to the women he has offended. But he also called on the council and his potential successors not to abandon the agenda he brought to the mayor's office: better neighborhood services, respect for city employees and concern for lower-income neighborhoods.
"The city should not have been put through this and my own personal failings were responsible," Filner said, his voice breaking.
Filner said that his own conduct provided the ammunition for his critics but that "well-organized interests who have run this city for half a century" conspired to run him from office. He pointed out for criticism politicians and the media.
He apologized to his ex-fiancee, Bronwyn Ingram, who ended their relationship just days before the first allegations were made against Filner. She said she had caught Filner making dates with other women.
"I love you very much," Filner said to Ingram, who was not present. "You love San Diego as much as I did. I personally apologize for the hurt I caused you."
"Justice has been done," said City Atty. Jan Goldsmith.
The deal approved 7-0 by the council does not resolve the lawsuit filed against Filner and the city by Los Angeles attorney Gloria Allred on behalf of Irene McCormack Jackson, Filner's former director of communications.
Under the agreement, the city will pay $98,000 to Filner's private attorneys. The city will also defend Filner against the Jackson lawsuit and pay any damages that result from a court decision or an out-of-court settlement.
Council members insisted that even though the deal obligates the city to assist Filner financially in fighting the lawsuit, it is in the best interests of the taxpayers because it may limit any damages the city might face from her case.
Even as he apologized, Filner remained defiant, blasting the council for its decision early not to pay his legal fees from a private attorney. "I cannot afford to continue this battle," he said, "even though if I did I know I would be vindicated."