Phyo Min Thein, 41, chairman of the Union Democratic Party, said he was quitting because of an "unfavourable pre-election environment."
"My resignation is proof to the international community that the forthcoming elections will not be free and fair," he said in a statement on Thursday.
Phyo Min Thein, a former student leader who spent 15 years in prison for participating in a pro-democracy movement suppressed by the military in 1988, said the ruling junta was restricting campaigning and not allowing a level playing field for this year's elections, the first in two decades.
He said the pro-junta Union Solidarity and Development Party was receiving preferential treatment from the Election Commission and that local officials were helping it recruit members.
He also accused the deputy education minister of threatening teachers and students with another military coup if they did not vote for the pro-junta party.
In contrast, he said, other political parties faced myriad legal restrictions.
Forty political parties are registered to contest the elections, and six others are awaiting approval to run.
The elections are to be held on a still-unannounced date later this year. Critics call them a sham designed to cement nearly 50 years of military rule.
Detained pro-democracy leader Aung San Suu Kyi's National League for Democracy party is boycotting the polls because of what it calls unfair and undemocratic election laws. It was disbanded in May because it refused to register.
The party swept the last elections in 1990 but was not allowed to take power by the military.
