The ex-shadow health minister said it was an "honour" to represent Copeland since 2005, adding: "Leaving Parliament is the hardest decision of my life."
He will stand down at the end of January, triggering a by-election in a seat Labour retained in 2015 with a 2,564 majority.
Mr Reed has been a persistent critic of Labour leader Jeremy Corbyn.
He resigned from Labour's front bench as soon as Mr Corbyn won the 2015 leadership contest.
In his resignation letter, he praised the efforts of the last Labour government and wished the current leader "every success" in his bid to become prime minister.
"In our country and in my community, the Labour Party remains the greatest movement for social and economic progress we have ever seen or are ever likely to see," he wrote.
Returning to Sellafield
In response, Mr Corbyn said: "I am sorry to hear that Jamie Reed is to stand down as MP for Copeland.
"Jamie has given great service to his party, his country and his constituency. He has been a powerful voice for rural and remote communities and served his community well, campaigning for additional flood defences and infrastructure for Cumbria. I wish him all the best in his future role.
"We now face a by-election and local party members will soon choose a candidate equally committed to Copeland and its people."
Analysis: By Iain Watson
Jamie Reed didn't hide his scepticism towards the current leadership of his party. He resigned from the front bench within a minute of Jeremy Corbyn's victory in September 2015, denouncing the new leader's opposition to nuclear energy as "fundamentally wrong". But he felt it was better to stay and fight his party's shift to the left rather than leave - and was congratulated by none other than the former SDP leader Lord Owen for that stance.
He insists now that his resignation as an MP isn't a protest against Jeremy Corbyn - instead, he says, he can help his community in other ways. He will be rejoining the nuclear industry where he worked before being elected to parliament in 2005. The question is whether his actions will lead to a meltdown in the Labour vote.
Apart from in 1997, the Copeland seat has always had only a very narrow Labour majority. It is believed about two thirds of voters backed Brexit and Sellafield is the main employer so a largely pro-Remain party led by a nuclear sceptic might find the political environment in this part of Cumbria rather challenging.
In his new job Mr Reed, a longstanding advocate for renewing the UK's nuclear weapons system, will be head of development and community relations at Sellafield, where he used to be a press officer.
Mr Reed said his departure was not prompted by differences with Mr Corbyn.
He told The Guardian: "This decision has got absolutely nothing to do with Jeremy Corbyn. On a personal level I've got a very cordial relationship.
"One of the reasons that I am moving on is because I think there's a better way of (serving the community) right now than to remain as a Member of Parliament."
Mr Reed voted for renewal of the Trident nuclear weapons system earlier this year, calling Mr Corbyn's opposition to nuclear weapons "juvenile" and "narcissistic".
At the 2015 election Jamie Reed won with 16,750 votes, Conservative Stephen Haraldsen came second with 14,186 votes, with UKIP third on 6,148 and the Lib Dems' Danny Gallagher fourth with 1,368. The Greens' Allan Todd came fifth with 1,179 votes.
Conservative Party chairman Patrick McLoughlin said: "We are sorry to see Jamie Reed leaving Parliament, but congratulate him on his new job, and what must have been a very difficult decision for him and his family.
"It is a sorry state of affairs when talented Members of Parliament like him no longer feel comfortable representing Jeremy Corbyn's Labour Party."
He added: "We look forward to the by-election, and the opportunity to set out how the Conservatives are building a country that works for everyone, not just the privileged few."
