The 41-year-old's decision comes after Cowden's disappointing start to the campaign that has seen them win just three games in the league all season.
"I have great faith in my own ability and in my team, however, results have not been what I would have wished, and in the interest in the club I have asked to be allowed to step aside in order to allow the club the opportunity to look elsewhere for a manager to secure a position in the Championship," Cameron said in a statement on Cowdenbeath's official website.
"I wish my players and the club every success for the rest of this season and the future."
Club chairman Donald Findlay added: "It is with sadness I have accepted Colin's resignation, it is a measure of the man that he put the interest of the club before his own interest. I have nothing but respect and admiration for him.
"As player and coach, he has made a huge contribution to the development of the club. He has a long and successful career ahead of him. I am proud to regard him as a personal friend and I wish him and his family all the best for the future."
Assistant manager Lee Makel will take charge of the team until a successor to the Scot is found.