His decision came after mounting pressure over his connection to right-wing think tank the Institute of Public Affairs, and revelations two weeks ago he faced a possible investigation into allegations received by the Prime Minister's department.

Mr Lloyd, who has been a controversial figure since the Abbott government appointed him to lead the Australian Public Service Commission in 2014, told the governor-general Sir Peter Cosgrove he will resign on August 8.

His links to the think tank came under growing scrutiny after it was revealed at a Senate estimates hearing in October he sent an email to a member of the IPA with an attachment showing what he described as "generous" provisions in public service enterprise agreements.

Mr Lloyd rejected suggestions he gave it special access and research under a barrage of questioning about his connection with the IPA from Labor senators.

Pressure mounted on the public service commissioner in May after Fairfax Media revealed the Prime Minister's department withheld emails relating to Mr Lloyd and the IPA following a freedom of information request, saying they could prejudice a possible investigation.

After initially refusing to answer repeated questions from Labor at a Senate estimates hearing last month asking whether he was under investigation, Mr Lloyd confirmed he was not.

However the acting merit protection commissioner Mark Davidson, who can start an inquiry, said a day later he was yet to decide on whether he would begin a probe into allegations the public service commissioner had breached a code of conduct.

The public service commission on Monday said Mr Lloyd had "for some time" considered departing before his term as commissioner ended, and denied he chose the time due to "recent events".

"An end date of around August 2018 had been under consideration," a spokeswoman said.

"The timing suited Mr Lloyd and his family."

Mr Lloyd's term was due to expire in December 2019.

A former Australian Building and Construction Commissioner, Mr Lloyd oversaw the public service commission as the Coalition government used new workplace bargaining rules that have been blamed for years of industrial turmoil between public servants and their employers.

Mr Lloyd, a member of the IPA, has been a target of criticism from the main public sector union and Labor.

He is responsible for upholding standards of integrity and conduct in the Australian Public Service, promoting its code of conduct, and can investigate allegations of misconduct by agency heads and other government employees.

The Community and Public Sector Union welcomed Mr Lloyd's resignation, and urged the Coalition government to appoint a successor who was "experienced", "committed" and reflected the public service's values.

Liberal senator Eric Abetz, who worked with Mr Lloyd as the minister overseeing the public service under former prime minister Tony Abbott, said he regretted his resignation and credited him with helping reduce the size of the government.

"Mr Lloyd was highly effective in ensuring the public service was a more efficient and effective body that taxpayers could have confidence in," Senator Abetz said.

"His diligent work assisted the government to reduce the size of government while ensuring a high calibre of service to the Australian public continued to be delivered."

Mr Lloyd has advocated a new public service workforce, predicting traditional hierarchical structures and union consultation will go, while "on-demand workers" and flexibility were the way of the future.

Before he was appointed APS commissioner, Mr Lloyd was the director of the IPA's work reform and productivity unit.

He has worked under multiple state and federal governments in senior roles including as a deputy secretary in the Howard government, as a senior deputy president of the Australian Industrial Relations Commission, and as the Victorian Red Tape Commissioner.