Benedict told the faithful gathered at St Peter's Square on Sunday that his abdication was God's will, insisting he was not "abandoning" the church.
Four days before the 85-year-old's often troubled eight-year rule ends, new talk of scandal hit the cardinals who will choose his successor; one of them, an archbishop from Scotland, had to deny a media allegation of misconduct with young priests in the 1980s.
With an American cardinal urged not to go to the electoral conclave due to his role in handling sexual abuse cases in the United States and the Vatican accusing media of running smears to influence the vote, the church faces a stormy succession.
But Benedict defended his shock decision to resign as dictated by his failing health; his address to tens of thousands of well-wishers was met with calls of "Viva il Papa!"
"The lord is calling me to climb the mountain, to dedicate myself even more to prayer and meditation," the Germany-born pontiff said in Italian, his voice strong and carrying clearly.
"But this does not mean abandoning the church. Actually, if God asks this of me, it is precisely because I can continue to serve her with the same dedication and the same love I have shown so far," he said, adding that he would be serving the church "in a way more in keeping with my age and my strengths".
As he spoke, two of about 117 cardinals who are due to enter the conclave to choose his successor as leader of the 1.2-billion Roman Catholics next month were mired in controversy.
Britain's top Catholic cleric, Cardinal Keith O'Brien of Edinburgh, rejected allegations published in the Observer that he had been involved in unspecified inappropriate behaviour with other priests in the past.
The paper said O'Brien, known for his outspoken views against homosexuality, was reported to the Vatican by three priests and a former priest, who said they came forward to demand O'Brien resign and not take part in the conclave.
"Cardinal O'Brien contests these claims and is taking legal advice," said a spokesperson for the 74-year-old cardinal.
He was the second cardinal to be caught up in controversy over his attendance ahead of the conclave, where 117 "princes of the church" under the age of 80 will elect a new pope from their ranks.
On Saturday, Catholic activists petitioned Cardinal Roger Mahony to recuse himself from the conclave so as not to insult survivors of sexual abuse by priests committed while he was archbishop of Los Angeles.
In that post from 1985 until 2011, Mahony worked to send priests known to be abusers out of state to shield them from law enforcement scrutiny in the 1980s, according to church files unsealed under a US court order last month.
Saints and sinners
Benedict's papacy was rocked by scandals over the sex abuse of children by priests in Europe and the United States, most of which preceded his time in office but came to light during it.
His reign also saw Muslim anger after he compared Islam to violence. Jews were upset over his rehabilitation of a Holocaust denier. During a scandal over the church's business dealings, his butler was convicted of leaking his private papers.
But the minds of those in the crowd in St Peter's Square, some holding banners reading "Thank you Holy Father," were not on scandals, real or potential, but on the church history unfolding around them.
"It's bittersweet," said Sarah Ennis (21), a student from Minnesota who studies in Rome. "Bitter because we love our Pope Benedict and hate to see him go but sweet because he is going for a good reason and we are excited to see the next pope."
Others, however, saw it as a possible harbinger of bad moons for the church.
"This is an ill wind blowing," said midwife Marina Tacconi.
"It feels like something ugly could happen. I'm 58 years old, I have seen popes come and go. But never one resign … I don't see it as a good thing."
The Sunday address was one of Benedict's last appearances as pontiff before the curtain comes down on a problem-ridden pontificate.
On Wednesday, he will hold his last general audience in St Peter's Square and on Thursday he will meet with cardinals and then fly to the papal summer retreat south of Rome.
The papacy will become vacant at 8pm Rome time (7pm GMT) on Thursday, February 28.
Cardinals will begin meetings the next day to prepare for a secret conclave in the Sistine Chapel.
They have already begun informal consultations by phone and email in the past two weeks since Benedict announced his shock abdication in order to build a profile of the man they think would be best suited to lead the church through rough seas.
The pope is expected to issue slight changes to church rules governing the conclave on Monday so that it could start before March 15, the earliest it can be held as determined by a detailed constitution by his predecessor John Paul.
Without a leader
Some cardinals believe a conclave should start sooner than March 15 in order to reduce the time in which the church will be without a leader at a time of crisis.
But some in the Church believe that an early conclave would give an unfair advantage to cardinals already in Rome and working in the Curia, the Vatican's central administration, which has been at the centre of accusations of ineptitude that some say led Benedict to step down.
The Vatican appears to be aiming to have a new pope elected by mid-March and then formally installed before Palm Sunday on March 24 so he can preside at the holy week services leading to Easter.
Benedict and his predecessor, John Paul II, made sure any man awarded a cardinal's red hat was firmly in line with key Catholic doctrine supporting priestly celibacy and Vatican authority and opposing abortion, women priests, gay marriage and other liberal reforms. – Reuters