In a letter to Secretary of State Mike Pompeo – obtained by The Washington Post and first reported by Politico - Ms Chang defended herself and criticised the "toxic environment" at the agency, where she had served as a deputy assistant secretary in the Bureau of Conflict and Stabilizations Operations since April.
Ms Chang denied creating or commissioning the Time cover and wrote that her resignation should be seen "as a protest and not as surrender", closing by saying that stepping down was "the only acceptable moral and ethical option for me at this time".
Her departure comes a week after an NBC News investigation found that the 35-year-old Trump appointee embellished her work history and made misleading claims about her professional background.
In her letter, Ms Chang challenged the report and accused her State Department superiors of refusing to defend her from "a character assassination based solely on innuendo".
The one-page document echoes criticism levelled at the department by other current and former officials, most notably during the House's public impeachment proceedings last week. Chang decried the agency's low morale and what she described as a dwindling air of professionalism.
"The Department of State is experiencing what I and many believe is the worst and most profound moral crisis confronting career professionals and political appointees in the Department's history," wrote Ms Chang, who has had no diplomatic experience before joining the State Department.
Officials at the White House and the State Department did not respond to requests for comment. Ms Chang's personal representative declined to comment beyond Ms Chang's letter and a rebuttal to the NBC News story.
Other high-profile examples of administration officials who resigned or reconsidered their nominations include Taylor Weyeneth, the 24-year-old who held a leading role in the White House's drug policy office but was quietly fired after a Post story cast doubt on his qualifications, and representative John Ratcliffe, the erstwhile nominee for director of national intelligence who withdrew from consideration after The Post reported on his false claims about arresting undocumented immigrants.
After Mr Trump announced that Mr Ratcliffe wouldn't be his nominee, the president defended the White House's scrutiny.
"I give out a name to the press, and they vet for me," Trump said. "We save a lot of money that way."
But Ms Chang, in her rebuttal document, argued that her "background was fully investigated by the FBI and State Department's Diplomatic Security. No questions were raised or concerns identified during the process".
Ms Chang was "appropriately issued" a top secret security clearance, she said.
She also distanced herself from the Time cover, which appeared onscreen with her during a 2017 interview on a public affairs show when she was the chief executive of a small nonprofit.
She was apparently there to discuss efforts to curb the influence of groups such as the Islamic State and Boko Haram, but five minutes into the interview, the show's host suggests that they "take a look at some pictures you brought with you of your work around the world".
The Time magazine cover flashed across the screen, the headline reading, "We change the world: Modern humanitarian in the digital age".
"Here you are on Time magazine, congratulations," the host, Mary Sit, said to Ms Chang. "Tell me about this cover and how this came to be."
Chang explained that her organisation used "drone technology in disaster response".
"I suppose I brought some attention to that," she said.
But in her response to NBC News, Ms Chang wrote that she hadn't brought the image with her that day and that she was "surprised by its appearance during the interview". However, she conceded that she "should have taken the opportunity to clarify" that the cover was not real.
In her State Department biography, Ms Chang claimed that she is "an alumna of the Harvard Business School" who has "addressed the Republican and Democratic National Conventions".
Ms Chang did complete a program at Harvard University, but one very different from the prestigious institution's master of business administration degree. Ms Chang attended an eight-week course known as the "Advanced Management Program", Brian Kenny, Harvard business school's chief marketing and communications officer, told The Post.
The program's website says graduates of the course "will become a lifetime member of the HBS alumni community", but Mr Kenny said it is "not on the same footing as an MBA".
Ms Chang contended that she was always truthful and that she never professed to have a degree from the school.
But Mr Kenny said the proper way to list such an experience like hers on a resume would be to declare oneself "an alum of the Advanced Management Program" and then note the year the course was completed. In her bio, Ms Chang was not specific - though in her letter to NBC News, she wrote that, "A review of LinkedIn profiles reveals this to be a common practice utilised by many individuals who attended the program".
She also defended her claim that she spoke to the Republican and Democratic National nominating conventions in 2016. She did not appear at convention-sponsored events, but rather she addressed the Global Oval, an international affairs policy summit convened during both conventions in the cities where they were held.
A representative for one of the organisations that put the summits together said speaking there would not be considered addressing the convention. Ms Chang later argued that she addressed attendees of both conventions.
Her letter said her resignation would be effective immediately, but as of Monday evening, her State Department biography, which appears to include the same photograph used in the doctored Time cover, was still online. However, a similar bio, on the website of the think tank New America, where Ms Chang once held a fellowship, was not.
The page now reads: "The content of this page has been deleted due to questions raised about its accuracy."
The Washington Post