Lord Young has quit as the Prime Minister's enterprise adviser after he told a newspaper many Britons had "never had it so good" despite a "so-called recession".
A spokeswoman for the Prime Minister said David Cameron had accepted the peer's resignation.
Lord Young of Graffham was recorded saying the Bank of England's decision to keep the base rate at a record low of 0.5% since March 2009 had left many homeowners up to £600 a month better off since the start of the "so-called recession".
Earlier, the Prime Minister sought to draw a line under the row, telling reporters his adviser was "extremely embarrassed" and has apologised.
"I mean, he's not a member of the government, he doesn't speak for the government and I think he'll be doing a bit less speaking in the future," Cameron said.
Lord Young's resignation is the second ministerial scalp effectively claimed by the media since the coalition government took office in May.
Former chief secretary to the Treasury David Laws resigned less than two weeks after taking his post following revelations about his private life.
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