Baroness Warsi has become the first minister to quit the government over its policy on Gaza.
The Faith and Communities Minister, who also had a role as a Foreign Office minister, resigned on Tuesday morning.
She said: “With deep regret I have this morning written to the Prime Minister and tendered my resignation. I can no longer support government policy on Gaza.”
In her resignation letter to David Cameron, Baroness Warsi wrote: "Our approach and language during the current crisis in Gaza is morally indefensible, is not in Britain's national interest and will have a long term detrimental impact on our reputation internationally and domestically."
She thanked colleague Eric Pickles, the Communities Secretary, for working with her to tackle hate crime and challenge antisemitism and Islamophobia.
But she concluded: "Early evidence from the Home Office and others shows that the fallout of the current conflict and the potential for the crisis in Gaza and our response to it becoming a basis for radicalisation could have consequences for us for years to come."
In response, Downing Street thanked Baroness Warsi for her work and a spokesman said: "Our policy has always been consistently clear - the situation in Gaza is intolerable and we've urged both sides to agree to an immediate and unconditional ceasefire."
The most senior Muslim woman in British politics, Baroness Warsi had become increasingly critical of Israel’s action against Hamas in recent weeks, and of her government’s response to it.
On Thursday she had used her Twitter account to ask for details of community meetings and protests over the situation in Gaza.
During her time in government she had worked closely with Jewish communities and organisations, concentrating particularly on Holocaust remembrance and the role of women in religion.
David Cameron has come under increasing pressure from Tory MPs - and opposition leader Ed Miliband - over the government's refusal to condemn Israel more harshly for its actions.