"This is not a positive step for the country at this time," she said. "The Turks and Caicos is going through a very difficult time already. To add this to it ... it costs us not just our reputation, but it costs us financially."
The office of Gov. Peter Beckingham declined comment except to say the corruption probe will continue and that officials will soon find a new attorney general. Shepheard's resignation becomes effective on Friday.
The announcement comes just a couple of months after the governor extended Shepheard's contract to September 2016 over protests by Ewing and other politicians.
In a statement earlier this month, Ewing said he was not satisfied with Shepheard's performance.
"We as a Government are being asked to cut expenditure and finding it difficult to provide funding for scholarships for our children, to provide adequate space in our schools and to create jobs for our people, whilst expenditure in the areas of the attorney general's responsibility goes unchecked," Ewing said.
The feud developed as the British territory seized money and property that officials say were improperly obtained by corrupt politicians. Authorities so far have recovered more than $20.5 million in cash and more than 3,000 acres (1,200 hectares) of government property they say was illegally sold or bought. The property is worth more than $100 million.
The island's former premier, Michael Misick, has also been a target of the investigation.
On Tuesday, a Brazilian court ordered his extradition. He was arrested there last year on a warrant issued by Interpol.
