The institute, codirected by a former York police officer, Michael Perelman, says on its website that it has offices in Philadelphia, Washington, and Jerusalem. Perelman said recently that it gathers threat information from a variety of sources.
The institute's contract came under intense scrutiny when tracking reports it produced showed it was monitoring scores of groups with no history of violence.
In his resignation letter, Powers told the governor he had reached the decision after "thorough examination and reflection" on "emerging events surrounding the credibility" of the information provided by the institute.
Rendell said he learned of the contract only last month and immediately ordered it canceled when it expires at the end of this month. He said he was deeply disturbed by the institute's activities.
He said Friday he did not ask Powers to step down but accepted his resignation effective Oct. 8.
"I do so out of mutual concern for the function of homeland security and the belief it's far too important to be set back by the distraction resulting from one operation of one man," Rendell said Friday.
Rendell, who leaves office in January, said he would await the findings of a task force led by his chief of staff, Steve Crawford, before determining when and whether he will name a replacement.
Democrats and Republicans in the legislature said Powers made the right move by resigning.
Sen. Lisa Baker (R., Lehigh), chairman of the Senate Committee on Veterans and Emergency Preparedness, convened a hearing on the issue, calling the monitoring of groups "toxic to the public trust."
