The two announcements, coming within minutes of each other, signal a new era for Germany's No. 2 lender.
The share sale was flagged last week, but the news about the CEO was a surprise.
Knof joined Commerzbank in 2021 and immediately put the bank through a radical overhaul, slashing thousands of jobs and hundreds of branches to restore profitability.
The German state has long held a 16.5% Commerzbank stake through its bank rescue fund after a bail-out 16 years ago during the financial crisis.
The bank's supervisory board chairman, Jens Weidmann, said he regretted Knof's decision but would begin the search for a successor.
The government said it was selling around 53 million shares in a placement directed at institutional investors and reducing its stake to 12% from 16.5%.
"Following the transaction, Federal Republic of Germany will remain Commerzbank’s largest shareholder," the government said.
But it has signalled that the sale is just a first step in a gradual sell-off of its holding.
Knof, a lawyer by training, joined Commerzbank after spending the bulk of his career at insurer Allianz before joining Deutsche Bank in 2019, where he was head of retail operations in Germany.
Prior to Knof's arrival, Commerzbank went through turbulent times, with on-and-off talks to merge with Deutsche Bank and then to sell a big Polish subsidiary.
An activist investor pressed for big changes, prompting the departure of Knof's predecessor and the bank's chairman.
During his tenure, Knof has played down prospects of a possible renewal of talks to merge with Deutsche, saying he was striving to keep the bank independent.
Commerzbank has returned to profit but executives have pointed to economic challenges ahead.
The bank's shares are up 17% so far this year but are far below the levels before the global financial crisis.
"I am proud to have successfully shaped this important path of the bank with the entire management team," Knof said.
"I used the summer break with my family to think hard about this step," he added.
