The 46-year-old former Australian Army corporal confirmed she was a British citizen on Tasmanian radio this morning and says she'll resign from the senate at noon today and will renounce her United Kingdom citizenship.
Unlike other dual citizens to fail their constitutional requirements, Senator Lambie may not be replaced by those beneath her on her 2016 election ticket.
"I'm happy to put on the record that I'm satisfied that my parents are both Australian citizens and I have no concerns about me being a dual citizen because of where they were born or came from", she said.
Lambie addressed the growing concern in a meeting on Monday, saying her home state of Tasmania would be "the first to know" should she resign.
"Before I go into the Senate, now that I know, I just want to let Tasmanians know, because they deserve to know before anyone else does".
Former deputy prime minister and Nationals leader Barnaby Joyce is now running for re-election after the High Court ruled he was in breach of the Constitution.
The resignation comes a week after she expressed confidence there was no issue with her citizenship.
Lambie, an outspoken senator who quit the political party headed by mining magnate Clive Palmer after entering parliament to become an independent, said she would immediately move to renounce her Scottish citizenship and vowed to return to parliament.
Australian Conservatives leader Cory Bernardi hinted another Senate colleague could be in breach of the constitution.
She is now the second Tasmanian senator to force a recount and replacement process, after the departure of Parry.
Devonport mayor Steve Martin is next in line to take Ms Lambie's seat in the Upper House, but Professor George Williams of the University of NSW told AAP his succession could be in doubt because of Mr Martin's role in local government.
The dual citizenship saga, which kicked off in July when two Greens Senators resigned after discovering they held dual citizenship, has plagued the parliament for months now and continues to threaten Prime Minister Malcolm Turnbull's delicate majority.
That could also constitute an office of profit under the Crown.