The director of the CIA, Mr George Tenet, under pressure for months to step down over the failure of intelligence about Iraq's weapons of mass destruction, resigned suddenly yesterday, citing "personal reasons".
The news caught Washington by surprise, and President Bush moved quickly to quash speculation that Mr Tenet was being made a scapegoat for intelligence setbacks.
Mr Bush broke the news to his senior staff at an Oval Office meeting early yesterday attended by Vice-President Dick Cheney, the Secretary of State, Mr Colin Powell, and the National Security Adviser, Dr Condoleezza Rice.
The President told them he did not want anyone speculating that Mr Tenet was leaving for anything other than personal reasons, a White House official said.
However, a former CIA director, Admiral Stansfield Turner, said he believed Mr Tenet was pushed out as "the President is trying to begin to cast the blame for the morass we're in in Iraq".
Mr Tenet had resisted calls for his resignation over the intelligence scandals, but had been expected to leave after the November presidential election.
His resignation comes shortly before a Senate panel is due to release a highly critical report on how Congress was deceived by the administration's claims before the war that Iraq was secretly developing some unconventional weapons.
Last July Mr Tenet accepted full responsibility for an unsubstantiated allegation in Mr Bush's January 2003 State of the Union address that Iraq was trying to buy uranium in Africa.
Last month the CIA director admitted to a panel investigating the 9/11 attacks that systemic problems in the intelligence community had left the country vulnerable, and he surprised panel members when he said they would take five years to fix.
Mr Tenet (51) informed Mr Bush of his decision in an hour-long meeting in the White House on Wednesday evening.
The news was made public by Mr Bush in a hastily-arranged appearance outside the White House before he boarded a helicopter at the start of a trip to Europe.
"I'm sorry he's leaving," Mr Bush said yesterday. "He's done a superb job on behalf of the American people."
Mr Tenet's resignation after seven years as the director of the CIA comes amid new controversies over intelligence lapses.
These include an FBI investigation into an alleged Pentagon leak of highly-classified intelligence to an Iraqi politician, Mr Ahmed Chalabi, who provided some of the flawed intelligence but has long been a bitter foe of the CIA.
CIA officers are also being investigated over the abuse of prisoners at Baghdad's Abu Ghraib prison and elsewhere in Iraq and Afghanistan.
The resignation has caused speculation about turmoil inside the Bush administration team that pursued the war against Iraq.
Mr Powell had recently been demanding an explanation from Mr Tenet about why he was given wrong intelligence for his presentation to the UN in February 2003 on Iraq's banned weapons.
Addressing CIA employees, Mr Tenet said: "It was a personal decision, and had only one basis in fact: the well-being of my wonderful family, nothing more and nothing less."
He said he would stay on the job until July 11th when the deputy director, Mr John McLaughlin, a veteran intelligence analyst, takes over as acting director.
The Democratic presidential nominee, Senator John Kerry, who had called on Mr Tenet to step down, said the Bush administration had to take responsibility for "significant intelligence failures".
Republican senator Mr Pat Roberts, chairman of the Senate Intelligence Committee, said yesterday before the news broke that the intelligence community "is somewhat in denial over the full extent of the shortcoming of its work on Iraq and also on 9/11".
Separately it was reported yesterday that Mr Bush has consulted a private lawyer over the possibility that he will be questioned by a grand jury investigating who in the White House leaked the identity of a CIA undercover agent, Ms Valerie Palme, as a way of getting at her husband, Ambassador Joseph Wilson, who had criticised claims about Iraq's weapons.