Princess Diana, 36, and Dodi al-Fayed, 42, died in a car crash in the Alma Bridge underpass in Paris on August 31st 1997.
Last year royal coroner Michael Burgess left his post at the head of the inquests, citing a heavy workload as his reason.
But Baroness Butler-Sloss said her decision was based upon her own inexperience.
"This was a decision I took in the interests of the inquests after a great deal of thought and reflection," she said.
"These inquests now require a jury, and I do not have the degree of experience of jury cases that I feel is necessary and appropriate for presiding over inquests of this level of public interest."
She also insisted that her departure would not signal a "fresh start" for the inquests, stating that she would "continue to preside over pre-inquest hearings until Lord Justice Scott Baker takes up the appointment in June".
"This will ensure the inquests' momentum is maintained while he will have the opportunity to familiarise himself with the voluminous paperwork associated with the inquests."
Earlier this year Mohamed al-Fayed, Dodi's father, won a high court ruling that the inquests should be heard before a jury
Last December a three-year investigation headed by former Metropolitan police chief commissioner Lord Stevens said Princess Diana and Dodi al-Fayed died as a result of a "tragic accident".
Operation Paget concluded that there was no evidence to support allegations the princess and her partner were murdered by the British establishment, as claimed by Harrods owned Mr al-Fayed.
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