The 49-year old German executive decided to quit the Gütersloh-based company after a stormy meeting on Sunday (28 July) with Bertelsmann's supervisory board, which had grown uncomfortable with the company's expansion into television and the Internet at the expense of the group's core publishing activities.
Bertelsmann, one of the world's top five media companies, has seen both success and failure in the new media world. Middelhoff made significant profits for the company by building up a relatively cheap 50% stake in AOL Europe and later agreeing to sell it back to AOL for an estimated $6.8bn (£4.4bn).
Bertelsmann also sold its telecommunications unit, MediaWays, to the Spanish telephone company Telefonica. MediaWays provides transmission services to AOL Europe, among others.
But the strategy has not worked as well with file-sharing company Napster, which went bankrupt in June, rendering worthless Bertelsmann's investment of an estimated $85m (£55m).
In addition to Napster, Bertelsmann is a founding member of MusicNet, a peer-to-peer music subscription service, which has also faced difficulties.
BOL.com, a Web site designed to compete with Amazon.com, has since been folded into Bertelsmann's successful book club unit.