His efforts to attract investment to Portugal after its near bankruptcy and bailout in 2011 may have played a role in his downfall, as the investigation focused on alleged illegalities in his government's handling of auspicious, multi-billion-euro projects to mine lithium and produce hydrogen.
Costa, 62, denies wrongdoing.
Some of these projects and long-term government plans involving the use of EU funds may now be compromised, but most of Costa's economic legacy will likely endure, analysts say.
Carsten Brzeski, global head of macro at ING, expected little financial market impact from the crisis thanks to the strong reputation the country had built for itself in recent years with its economic policies.
Although Portugal enjoyed its longest period of growth in decades and slashed public debt under Costa's stewardship, the Socialist enjoyed little popularity at home due to his successive governments' frugality and several scandals involving hand-picked officials.
Politically, many analysts credit Costa and his impressive negotiating skills with achieving the impossible when he hammered out a post-election alliance in parliament in 2015 with far-left parties to unseat the centre-right.
The hard-left support had evaporated by the start of his second term in 2019 as his partners demanded more social spending and opposed deficit cuts for which Costa and his finance ministers won praise in Brussels.
ACHIEVING THE IMPOSSIBLE
But when his government collapsed in late 2021 as a consequence of parliament throwing out the budget bill, Costa again defied the odds as his party won an outright majority.
"He said that an absolute majority is not synonymous to absolute power. What an example of democratic leadership," German Chancellor Olaf Scholz said in April about Costa's reelection.
Before becoming prime minister, Costa was mayor of Lisbon in 2007-2015, capitalising on a then fledgling tourism boom to develop the capital.
He was seen as being the right-hand man of former premier Jose Socrates, who was imprisoned in 2014 on suspicion of corruption and tax evasion, but has tried to distance himself from the former prime minister.
Costa's father was Goan writer Orlando da Costa, a militant in the Communist party, and his mother, Maria Antonia Palla, is a journalist and women's rights advocate.
Many politicians and analysts said Costa had grown arrogant in his third term, reflected in his decision to keep Infrastructure Minister Joao Galamba despite pressure from the president and public opinion to fire him over controversies around state-owned airline TAP in January 2023.
But Costa achieved several successes, including the fastest pace of growth in 35 years in 2022 and a projected budget surplus for this year and next.
Costa may be leaving under a cloud but ultimately he may be remembered for reviving a moribund economy, said ING's Brzeski.
"This ends a government which clearly led the economy into a few golden years and managed the transition from austerity to growth," Brzeski said.
