Ray Kelvin is accused of “forced hugging”, asking young female staff to "sit on his knee, cuddle him or let him massage their ears".
The under-fire retailer yesterday hired a top law firm to conduct an investigation into the allegations.
Mr Kelvin said in a statement that the accusations had "raised some very serious and upsetting issues".
He said: "Ted Baker has been my life and soul for 30 years.
"I love this company and I care deeply for all my colleagues. It's for that reason that I have decided to take a temporary leave of absence."
The company said it had been made aware of "further serious allegations" concerning Mr Kelvin's conduct.
Chief operating officer Lindsay Page has been appointed interim CEO.
Law firm Herbert Smith Freehills will report to a committee of the company's non-executive directors, chaired by Sharon Baylay.
Shares fell to a five-year low this week as investors digested the news and fretted over the fallout.
Ted Baker has denied that hugging was "insisted upon".
More allegations have since emerged including claims Mr Kelvin pushed an employee against a wall because he wasn't invited to his wedding.
The 63-year-old is said to have become angry after learning the engaged couple, both senior staff, had only invited him to their reception and not the ceremony.
Following the incident, the couple left the company but were both given pay-offs after agreeing to sign non-disclosure agreements.
Kelvin already faces bullying and harassment allegations.
He is accused of making sexual innuendos towards staff, stroking people’s necks, talking about his sex life.
Kelvin is said to have hugged new recruits for more than a minute.
The firm says a “thorough independent investigation” will be conducted into those allegations, which it disputes.
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