Kwasi Kwarteng has paid the price for the chaos unleashed by his mini-budget as he was sacked by Liz Truss.
He has accepted the Prime Minister’s request he “stand aside” as Chancellor.
Former Health Secretary Jeremy Hunt has been appointed Chancellor in his place, Downing Street said.
Mr Kwarteng says he will support his successor but insisting “following the status quo was simply not an option”.
In a letter to the Prime Minister, Mr Kwarteng said: “When you asked me to serve as your Chancellor, I did so in full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices.
“However, your vision of optimism, growth and change was right.
“As I have said many times in the past weeks, following the status quo was simply not an option.
“For too long this country has been dogged by low growth rates and high taxation — that must still change if this country is to succeed.”
Mr Kwarteng flew back early from International Monetary Fund talks in Washington on Friday to be informed of his fate in a brief meeting with the PM.
Ms Truss will stage a press conference in Downing Street later on Friday in which she is expected to announce major changes to Mr Kwarteng’s £43 billion tax giveaway.
Mr Kwarteng’s departure may give Ms Truss some brief breathing space as she seeks to shore up her battered authority after weeks of turmoil following his “fiscal event” last month.
But it will also raise fresh questions about her chances of survival – because she was closely linked to the policies that caused the problems.
The commitments to reverse a hike in national insurance rates and ditch a planned rise in corporation tax, without explaining how they would be paid for, were the key planks of her leadership election campaign.
But after the financial markets took fright – with the pound plummeting against the dollar and the cost of government borrowing soaring – the Conservatives have seen their opinion poll ratings tank.
‘Not fit for office’
In response to today’s developments, Labour’s York Central MP Rachael Maskell said: “Liz Truss, in scapegoating the Chancellor, still holds the power at Number 10.
“Nothing has changed. This Cost of Living scandal, exacerbated by the housing crisis here in York, is down to 12 years of the Tory Party looking after their own interests, not investing in the needs of people up and down the country.
“Due to the Prime Minister’s obsession with cutting taxes for the super-rich, she has failed to balance the books, expecting working people to pick up the pieces.
“Neither the Chancellor or Prime Minister are fit for office; economically illiterate and politically incompetent.”
And she wondered if Liz Truss could survive in office: