Peddireddi met Assembly Speaker Nadendla Manohar and handed over his resignation.
A former minister and five-time MLA, Peddireddi is a known detractor of Kiran Kumar in their native Chittoor district.
Kiran dropped Peddireddi from the Cabinet when he became Chief Minister in November 2010.
Peddireddi had set November 29 as deadline for the Congress high command to replace the Chief Minister.
With no indication of a leadership change, Peddireddi tendered his resignation as an MLA.
Already three MLAs have quit their posts and joined the YSR Congress.
Union Minister S Jaipal Reddy, state Congress president Botsa Satyanarayana and other senior leaders reportedly spoke to Peddireddi since yesterday and tried to prevail on him not to quit.
But Peddireddi remained steadfast and met the Speaker this morning and put in his papers.
"I have repeatedly been asking the Congress high command to replace Kiran Kumar as Chief Minister since he is totally incompetent to hold the post.
But so far the high command did not take any action in this regard.
Hence, I have resigned," Peddireddi told newsmen.
He, however, announced he would continue in Congress.
"Ever since he became Chief Minister, Kiran stopped all development works in my Punganur constituency beginning with the drinking water scheme. Besides, he has been harassing my followers in the district," he alleged.
"Kiran never held even a small party post in Chittoor district or in the Pradesh Congress Committee.
He never served as a minister and did not have any administrative experience.
He is totally incompetent and misfit to be Chief Minister," Peddireddi said.
Asked whether he would join the YSR Congress, the former minister said he would continue in the Congress only.
"If you think I will join any other party, it's up to you," he quipped.
Peddireddi's resignation might push the Kiran Kumar Reddy government into a further awkward position as already three MLAs quit their posts and joined the YSR Congress.
Their resignations are, however, pending with the Assembly Speaker.
If the resignations are accepted, the Congress strength in the 294-member Assembly will fall to 149, just one more than the "magic figure" of 148.
This will place the government in a perilous position in the event of a no-confidence motion in the Assembly as the seven-member Majlis-e-Ittehadul Muslimeen (MIM) has already withdrawn its support.
YSRC, which claims that some more MLAs from the ruling party are ready to jump to its side, is seeking to move a no-trust motion in the Assembly during the winter session.
It is trying to muster enough numbers for the purpose as it has 17 MLAs of its own and the support of eight "rebels" from Congress and TDP.
It will need the backing of another five MLAs to ensure the no-confidence motion is taken up for debate in the House.
YSRC is pinning hopes on MIM for this, party sources said.