Iraqi Finance Minister Rafa al-Essawi announced his resignation on Friday at an anti-government protest, ramping up a conflict between his secular Sunni-backed Iraqiya bloc and the Shiite premier.
State television quoted Prime Minister Nuri al-Maliki's office as saying the resignation of Essawi, a leading Sunni and Iraqiya member, would not be accepted until an investigation into "his financial and administrative violations" was complete.
"I announce, in response to you now, that I present my resignation," Essawi told thousands of demonstrators in Ramadi, west of Baghdad.
"I will not be part of a government that has blood on its hands. I will not sell you (or) sell your rights," he said.
"We are with you, Essawi," protesters chanted, also shouting "Allahu akbar!" (God is greatest).
Maliki is at loggerheads with Iraqiya, which is a part of his national unity government, over its accusations of authoritarianism and sectarianism in the run-up to key provincial polls due to be held next month.
"The resignation proves that the political crisis in the country cannot be solved soon," Iraqi political analyst Ihsan al-Shammari told AFP.
"Essawi knows now that he cannot continue working with this government, especially at a time when there are (reports) that there is an arrest warrant against him," Shammari said, referring to Iraqi media reports.
Protests have been staged in Sunni-majority areas of Iraq for weeks, calling for Maliki's resignation and decrying the alleged targeting of their community by the Shiite-led authorities.
The protests were initially sparked by the arrest of several of Essawi's guards on terrorism charges in December, but have since expanded markedly.
In addition to Ramadi, demonstrations were also held on Friday in areas including Mosul, Fallujah, Tikrit, Samarra and Baghdad.
The resignation "was taken after coordination with Iraqiya, because Dr Rafa al-Essawi thinks that the procedure taken against him by the prime minister made it impossible for (Essawi) to work with him," MP Haidar al-Mullah, an Iraqiya spokesman, told AFP, referring to the arrest of the guards.
"Iraqiya will discuss all options in order to put pressure to achieve the demands of the protesters," Mullah said.
In Baghdad, security forces cordoned off Sunni areas including Adhamiyah to prevent protesters from leaving, and set up additional checkpoints in the city.
The Iraqi government has sought to curtail demonstrations by saying it has released thousands of detainees and raised the salaries of the Sahwa anti-Qaeda militiamen.
Deputy Prime Minister Hussein al-Shahristani said on Thursday that 4,000 prisoners had been released since the start of the year, some of whom can request compensation if they are not guilty of a crime.
The arrest of Essawi's guards at the end of last year came almost exactly a year after Sunni Vice President Tareq al-Hashemi's guards were arrested and accused of terrorism.
An arrest warrant was also issued for Hashemi, also a member of the Iraqiya bloc, who fled to Iraq's autonomous Kurdistan region and eventually to Turkey, saying the charges against him were politically motivated.
Hashemi has since been given multiple death sentences in absentia on charges including murder, while death sentences have been handed to his guards as well.