Earlier this month (Nov12), the 52 year old, who voices Elmo on the kids show, was accused of having a sexual relationship with a Pennsylvania man when he was 16.
The accuser later recanted, confirming he was an adult during his relationship with Clash, but now a second man, Cecil Singleton, has come forward, claiming he had a sexual phone chat with the star in 1993 when he was only 15.
Singleton is suing Clash for $5 million (£3.1 million).
The new lawsuit came as Clash was preparing to return to Sesame Street after taking a leave of absence, but now it appears he won't be back.
Confirming the news of his resignation, a statement from Sesame Street producers reads: "Sesame Workshop's mission is to harness the educational power of media to help all children the world over reach their highest potential. Kevin Clash has helped us achieve that mission for 28 years, and none of us, especially Kevin, want anything to divert our attention from our focus on serving as a leading educational organization.
"Unfortunately, the controversy surrounding Kevin's personal life has become a distraction that none of us want, and he has concluded that he can no longer be effective in his job and has resigned from Sesame Street. This is a sad day for Sesame Street."
Clash, who has provided the voice of the lovable puppet since 1984, will be replaced by understudies he has trained on the show.