Grant Shapps has dramatically quit the government after admitting he should have done more to deal with claims of bullying in the Tories' youth wing.
Mr Shapps said the slew of allegations about behaviour by Mark Clarke when he was party chairman had convinced him that the "buck should stop with me".
But Downing Street has insisted the Prime Minister still has "full confidence" in current chairman Lord Feldman.
The resignation of both men had been demanded by the father of a Conservative Party activist who killed himself, leaving a note condemning Mr Clarke - who denies any wrongdoing.
But the final straw for Mr Shapps appears to have been the emergence of a letter sent to him by ex-minister Baroness Warsi in January, complaining that the election campaign aide had been abusing her on Twitter.
The party had previously insisted no complaints against Mr Clarke, who ran its "RoadTrip" canvassing drive in the run-up to the election, were received before August. He has since been expelled.
In a letter to David Cameron confirming his departure, Mr Shapps wrote: "Although neither the Party nor I can find any record of written allegations of bullying, sexual abuse or blackmail made to the Chairman's office prior to the election, I cannot help but feel that the steady stream of those who raised smaller, more nuanced, objections should have perhaps set alarm bells ringing sooner.
"In the end, I signed that letter appointing Mark Clarke 'Director of RoadTrip' and I firmly believe that whatever the rights and wrongs of a serious case like this, responsibility should rest somewhere.
"Over the past few weeks - as individual allegations have come to light - I have come to the conclusion that the buck should stop with me."
Mr Shapps said he had given Mr Clarke a "second chance" after he was removed from the party's candidate list at the 2010 election.
"He presented himself as having learned from his past experience, being more mature and wanting to prove himself again," he wrote.
"After some discussion, I appointed him in order to incorporate RoadTrip into our wider campaign. The aim being to better coordinate his activity with our rapidly expanding Team2015 target-seat operation."
Mr Shapps said the loss suffered by the family of Elliott Johnson, the 21-year-old who was found dead on railway tracks in September, was "simply unimaginable".
"More than anything, I am deeply shocked and saddened by the recent death of Elliott Johnson and my thoughts are with his friends and family," he added.
In his letter accepting the resignation, Mr Cameron said he knew it had been a "very difficult decision" and Mr Shapps had given it "a great deal of thought".
Mr Cameron said he would "always remember" that Mr Shapps had been "a loyal and trusted supporter of mine from the very beginning".
"You have made a lasting contribution to the work of the Government, but you have also been a faithful servant of our party, and I know you have much more to give in the years ahead," he added.
Speaking at a Commonwealth summit in Malta earlier, Mr Cameron said a "proper inquiry" was being held into the allegations and would be overseen by an independent lawyer.
"I feel deeply for his parents. It is an appalling loss to suffer," he said.
"In terms of what the Conservative Party should do, there needs to be and there is a proper inquiry to ask all the questions and interview all the people who have come forward. That will take place."
He added: "It is a tragic loss of a talented young life. It is not something that any parent should have to go through and I feel for them deeply."
Number 10 said there was no change to the position of Mr Cameron's close friend Lord Feldman, who had been co-chairman of the party with Mr Shapps and has held the post alone since May.
Mr Johnson's father Ray welcomed Mr Shapps' resignation.
"It's about time, he should have resigned several weeks ago," he told the Guardian.
Former Big Society minister Nick Hurd, who left government in a pre-election reshuffle, will fill the gap at the Department for International Development.
But he has been appointed parliamentary under-secretary of state - a lower-ranking role than Mr Shapps, who was minister of state.