Dr Liam Fox has resigned as Britain's defence secretary following allegations of cronyism and misconduct involving the businessman Adam Werrity.
A stream of news stories about Mr Fox and his former flat-mate and best man at his wedding, had eroded the politician's credibility ahead of an inquiry into the affair that was due to bepublished within days.
Mr Werrity was found to have visited Dr Fox at the ministry of defence up to 40 times and joined him on 20 foreign visits, where he sat in on meetings even though he had no security clearance.
In a letter to prime minister David Cameron, Dr Fox said that he had "mistakenly" allowed the distinction between his personal interest and government activities to become "blurred".
"I have also repeatedly said that the national interest must always come before personal interest. I now have to hold myself to my own standard," he said.
"I have therefore decided, with great sadness, to resign from my post as secretary of state for defence — a position which I have been immensely proud and honoured to have held."
Earlier this week, Dr Fox apologised after claims that Mr Werrity may have breached national security.
Mr Cameron had expressed confidence in his minister but it was known that the prime minister was losing patience with the political storm engulfing Dr Fox.
Mr Fox's resignation forces the British prime minister into a Cabinet reshuffle he does not want.
Northern Ireland Secretary Owen Paterson and International Development Secretary Andrew Mitchell are being tipped as possible contenders for the defence job.