Downing St and the Metropolitan police have issued statements relating to the resignation of the Secretary of State for Work and Pensions, Peter Hain.
“Peter Hain has made his statement,” said Downing St.
It is understood the Cabinet minister phoned Prime Minister Gordon Brown at 11.30am, told him about the decision of the Electoral Commission to refer his failure to disclose donations worth more than £103,000 to the police, and offered to resign.
“The Prime Minister has accepted Peter Hain’s resignation. There will be an exchange of letters in due course.”
The Metropolitan police have confirmed they will be investigating.
“The Met has today received a formal referral from the Electoral Commission in connection with potential offences under the Political Parties and Referendums Act 2000 regarding donations received,” a spokeswoman said.
“An investigation will now begin by detectives from the Specialist and Economic Crime Command.”
Mr Hain has maintained that poor administration was the reason that 17 loans to his campaign to become Deputy Leader of the Labour party were not declared properly.
The Electoral Commission was made aware of the donations four months after the contest was over, which is against the law.
Questions have also been raised about why some of the donations were made through a think tank, the Progressive Policies Forum.
Donations through a third party are also illegal.
The Prime Minister had previously described the lack of proper declarations by the Hain campaign as “incompetence.”
Chris Grayling, the Shadow Secretary of State for Work and Pensions, said:
“What is important now is for Gordon Brown to take rapid action to restore effective leadership to a department that has clearly been distracted by the events of the last few weeks.”
Lib Dem spokesman Danny Alexander said: “The transition from Blair to Brown feels increasingly like the transition from Thatcher to Major.”
Mr Hain, 58, has been the MP for Neath since 1991.
In the 1970s he was best known as a radical anti-apartheid campaigner.
He was instrumental in a direct-action movement that disrupted tours by the South African rugby union and cricket teams in 1969 and 1970.
He has held various government posts since the 1997 general election, joining the Cabinet in 2002.
He came fifth in the June 2007 contest to succeed John Prescott as Deputy Leader of the Labour party.