The British Labour Party's general secretary quit due to allegations that a wealthy donor gave the party 400,000 pounds (US$825,000; 556,000 EUR) without revealing his identity.
Peter Watt said he had been aware of the arrangement by which businessman David Abrahams funneled money through his business associates. But Watt said he thought he had been acting in accordance with campaign finance reporting requirements.
"I was advised that, unbeknown to me, there were additional reporting requirements," Watt said in a statement, adding that he was resigning with immediate effect.
The scandal over Abrahams' donations has drawn intense media attention in Britain and raised renewed questions over the ethics of how Britain's political parties raise money.
Funding scandals have dogged the Labour Party, which has been in power for the past decade.
Former Prime Minister Tony Blair's final years in office were clouded by an investigation into whether his associates offered honors, such as knighthoods and seats in Britain's House of Lords, in return for loans to the Labour Party.
No charges were ever brought, but the investigation damaged Blair and led to a broad-based effort to reform the fundraising system. But that effort broke down in October amid recriminations between the Labour and opposition Conservative negotiators trying to broker the deal.