Home Office boss Philip Rutnam has quit following a public dispute with Priti Patel.
The senior civil servant plans to sue the government after he became embroiled in a furious row with the Home Secretary.
Sir Philip said there had been an orchestrated campaign against him.
He read a statement on BBC News which said: "I have this morning resigned as permanent secretary of the Home Office. I take this decision with great regret after a career of 33 years.
"I am making this statement now because I will be issuing a claim against the Home Office for constructive dismissal.
"In the last 10 days I have been the target of a vicious and orchestrated briefing campaign.
"It has been alleged that I have briefed the media against the Home Secretary.
"This along with many other claims is completely false."
He added: “The Home Secretary categorically denied any involvement in this campaign to the Cabinet Office. I regret I do not believe her."
Sir Philip went on: "The Home Secretary categorically denied any involvement in this campaign to the Cabinet Office.
"I regret I do not believe her. She has not made the effort I would expect to dissociate herself from the comments.
"Even despite this campaign I was willing to effect a reconciliation with the Home Secretary.
"But despite my efforts to engage with her, Priti Patel has made no effort to engage with me to discuss this.
"I believe these events give me very strong grounds to claim constructive, unfair dismissal and I will be pursuing that claim in the courts."
Sir Mark Sedwill, Cabinet Secretary and Head of the Civil Service, said: “I have received and accepted with great regret the resignation of Sir Philip Rutnam.
“I thank him for his long and dedicated career of public service. Shona Dunn, the Second Permanent Secretary at the Home Office responsible for borders, immigration and citizenship, will become Acting Permanent Secretary with immediate effect.
“The Home Office’s vital work to keep our citizens safe and our country secure continues uninterrupted.”
Sir Philip's decision to step down prompted opposition politicians to express disapproval about the way the Home Office is being run.
Labour shadow Cabinet Office minister Jon Trickett tweeted: "Driving out of office a professional career civil servant is the clearest sign yet of the underlying right wing authoritarian but incompetent nature of the Johnson Government.
"They will not tolerate dissent yet can't cope with flooding or a poss pandemic."
Yvette Cooper, chairwoman of the Commons home affairs committee, said it was "appalling" that the situation at the Home Office was allowed to deteriorate to such a level that the permanent secretary chose to publicly resign and pursue legal action against the Government.
The former cabinet minister said: "The allegations made by Sir Philip Rutnam are very serious and this reflects extremely badly on the Government, not just the Home Office.
"To end up with one of the most senior public servants in the country taking court action against one of the great offices of state shows a shocking level of breakdown in the normal functioning of government.
"For the Home Secretary and Prime Minister to have allowed things to reach this point is appalling, especially at a time when the Home Office faces crucial challenges with rising violent crime, forthcoming counter-terrorlegislation, new immigration laws, and sensitive negotiations on post-Brexit security co-operation."
Sir Philip's decision to step down follows news of a row with Patel.
The Home Secretary reportedly demanded the removal of the permanent secretary, who is said to have raised concerns about her behaviour.
According to the Times, which revealed the allegations, multiple sources in the department have accused her of bullying.
The Times reported the row followed a series of demands from the Home Secretary, some of which officials said were “illegal”.
These were said to include questioning why police could not use force against Extinction Rebellion protesters.
Patel is also said to have told Sir Philip to fire director of communications Andy Tighe on Christmas Eve, MailOnline reported.
He allegedly declined to carry out the orders because of the timing.
The Home Office declined to say whether Sir Philip had raised concerns about the minister, whether the minister demanded his removal, whether the claims were being investigated, or whether she had raised the possibility of using force against climate protesters.
However, a spokeswoman for the department said neither it nor the Cabinet Office - which probes breaches of the Ministerial Code - had received a "formal" complaint.
Dave Penman, general secretary of the FDA Union for senior managers and professionals, said: "Sir Philip’s decision to resign and claim constructive dismissal demonstrates once again the destructive consequences of anonymous briefings against public servants who are unable to publicly defend themselves.
"This cowardly practice is not only ruining lives and careers, but at a time when the Home Office is being tasked with delivering a demanding Government agenda on immigration, and preparing for a public health emergency, it has diverted energy and resource in to responding to unfounded accusations from sources claiming to be allies of the Home Secretary."
Former Transport Secretary and Schools Minister Andrew Adonis offered Sir Philip his backing.
Number 10 has been contacted for comment.
More to follow.
