Knox Banner, a longtime leader in the resurgence of downtown Washington, has resigned as director of the D.C. Office ot Business and Economic Development effective Dec. 31, Mayor Marion Barry announced yesterday.

Barry said he accepted the resignation of Banner "with great regret" and praised him for fostering a "spirit of cooperation . . . between the public and private sectors" in the city. No successor has been named.

Banner, 65, was executive director of the National Capital Downtown Committee, better known as Downtown Progress, from its creation in 1960 until it was disbanded in 1977. At that time , then-Mayor Walter E. Washington appointed him the first director of the city's economic development office.

Downtown Progress promoted and planned the renewal of the city's traditional commercial core, between the Capitol and the White House -- an area where development has been spurred by Metro construction and plans for the new convention center.

Before coming to Washington, Banner headed the urban renewal and public housing programs in Little Rock, Ark.

Barry, since taking office last January, has thinned the ranks of former mayor Washington's appointees by encouraging retirements of some and assigning others to lesser duties.

While Banner's retirement was officially described as voluntary, one administration source said Barry signaled to banner a desire to choose his own director. The mayor has relied heavily in the field on Ann Kinney, who carries the title of coordinator for overall economic development.

Banner said he will qualify for full retirement benefits based upon 19 years of military and previous government service.