Like her Senate colleague Scott Ludlam, she left her country of birth as a young child but now realises she is in breach of the constitution.
Larissa Waters left Canada as an 11-month-old baby.
She never returned and says she assumed her citizenship expired long ago.
"It's with great sadness that I have discovered that I'm a dual citizen and that I'll be forced to stand down from my position in the Senate. I apologise wholeheartedly for the damage and the embarrassment that this will cause, but I take full responsibility for this oversight. This was my fault and my fault alone."
The news comes less than a week after Greens senator Scott Ludlam discovered he held dual citizenship with New Zealand and resigned.
It was his departure that prompted Ms Waters to seek legal advice and led her to the realisation.
Both fell foul of section 44 of the constitution, which prevents dual citizens from being elected to the parliament.
Ms Waters says it is unfortunate the mistake has ended a six-year career in the Senate.
"I have no allegiance to Canada. I left as a baby, and I've never been back, so it's pretty heartbreaking to me that that disqualifies me from continuing to do a job that I've really loved."
Ms Waters says she has not ruled out a return to parliament one day.
But the Greens are now down two senators, one in Queensland and one in Western Australia.
Both positions will need to be filled via a recount and will likely be returned to the Greens.
For now, Greens leader Richard di Natale finds himself missing both of his co-deputy leaders.
"It is unprecedented, of course, to have the resignation of two such outstanding people from this parliament, two leaders of such integrity, such honesty, two people who have done the Greens and, indeed, this nation proud."
He is promising to conduct a party-wide review, double-checking the eligibility of every member.
"I have immediately spoken to our two national co-conveners, and we are committed to a thorough root-and-branch review so that we strengthen our governance, improve our internal processes and we make sure that this never happens again."
Dozens of federal politicians were born overseas.
The acting national secretary of the Labor Party has released a statement saying Labor is confident in the eligibility of all its members.
