Prosecutors said the mayor accepted a $500,000 low-interest loan from the city in 2004, just months after voting to extend a housing incentive program to include elected officials.
Dorn had been facing trial on felony charges and could have gone to prison, but two of the charges were dropped as part of a plea agreement.
"He wanted to put closure on this because it affected his family and his ability to govern," said Dorn's attorney, Albert Deblanc, Jr.
The Los Angeles County District Attorney's Office said Dorn, a former Superior Court judge, will be barred from holding public office for the rest of his life.
The Inglewood City Council released the following statement on the resignation of Mayor Dorn:
The resignation of Mayor Roosevelt Dorn is an unfortunate development and a sad day for Inglewood. We acknowledge Mayor Dorn for his long service and commitment to the City and its residents, and we wish him and his family well. At this time, our priority is to ensure that the transition prescribed by the City Charter proceeds seamlessly, and that City services continue to be delivered at the highest level possible without interruption.
The Associated Press and City News Service contributed to this report.