Romer, the head of the Council of Economic Advisers, announced her resignation on Thursday. It takes effect Sept. 3.
She will return to her job as a professor of economics at the University of California, Berkeley. The White House cast the decision as an unsurprising one driven by family reasons; in a statement, Obama said Romer has long wanted to return to California, where her son will be starting high school in the fall.
Romer has been one of the administration's most prominent voices on the economy, making frequent appearances on television and at White House events to promote Obama's policies. Her resignation comes as the White House labors to convince the public that the economy is on the right track amid near-double digit unemployment.
Obama inherited an economic disaster in 2009. Since then, the economy began growing, accelerating in the winter and spring. It spurred some modest hiring but not enough to rapidly reduce the unemployment rate, which is 9.5 percent.
Romer has met with Obama almost every day to help chart the government's response to the financial meltdown, the White House said.
"Christy Romer has provided extraordinary service to me and our country during a time of economic crisis and recovery," Obama said. "The challenges we faced demanded more of Christy than any of her predecessors, and I greatly valued and appreciated her skill, commitment and wise counsel."
Romer's resignation came amid undercurrents of tension between her and Larry Summers, director of the White House National Economic Council. One administration official, speaking on condition of anonymity to discuss internal relations at the White House, downplayed that notion, saying Romer and Summers often emerged as strong allies.
Summers said Monday night that Romer has been "an extraordinary friend and colleague at the White House", and he looked forward to drawing on her advice in the future.
The official said no decision has been made on who will replace Romer as head of the Council of Economic Advisers.
The White House has vigorously defended its interventions - chiefly the $862 billion stimulus bill approved by Congress - as moves that first prevented further freefall and then began turning around the economy.
Romer, along with Vice President Joe Biden's top economist, Jared Bernstein, wrote in a January 2009 report that the economic stimulus package Obama was proposing would keep unemployment under 8 percent. Without the stimulus, the report said employment would rise to about 9 percent in 2010. Yet unemployment has surpassed that figure.
Republicans have seized on that point.
On Friday, the government will release unemployment numbers for July that are expected to show a loss of 65,000 jobs because of the end of temporary positions with the U.S. Census Bureau. The unemployment rate is not expected to budge much from its current 9.5 percent.
Romer called her work the "honor of a lifetime". She said: "While I look forward to returning to research and teaching, the opportunity to help shape economic policy these past 20 months, and to work with the other members of the economic team and my colleagues on the CEA, is one I will always cherish."
A person close to Romer said she is a top contender to be named president of the Federal Reserve Bank of San Francisco, an appointment that would be made by the regional organization's board of directors. The source spoke on condition of anonymity because a decision has not been made.