The governor, Yoichi Masuzoe, on Wednesday became the second governor of the Japanese capital to quit over a scandal since Tokyo won the right to hold the 2020 summer games.
Other embarrassments for the city have included having to scrap plans for both the centrepiece stadium and for the official logo for the games.
The head of the Tokyo 2020 organising committee, a former prime minister, Yoshiro Mori, said he understood that Masuzoe's resignation was what most Tokyo citizens wanted, but the timing was unfortunate.
"Just as everybody was getting into step and things were starting to move, it's as if one wheel has come off," Mori told reporters.
"It is really too bad."
Masuzoe quit hours before a no-confidence vote was scheduled in the Tokyo assembly and under pressure from officials from the ruling party of Prime Minister Shinzo Abe, who feared a voter backlash in an upper house election next month if he had stayed in office.
Masuzoe's refusal to explain his spending, which included using political funds to pay for family trips and artwork, fuelled anger among voters.
An election for a successor may take place on July 31, meaning the new governor would be able to attend the Olympics in Rio de Janeiro, and accept the Olympic flag when it is handed to Tokyo as host of the next summer games.
Though the resignation of Masuzoe's predecessor, who was caught up in a funding scandal, delayed some of Tokyo's early 2020 preparations, Mori said Masuzoe's resignation was unlikely to have a long-term impact due to the work of Tokyo officials.
"The pilot may have changed but ... I don't believe this will be a big problem."
Planning was earlier hit by the scrapping of the plan for the main stadium and plagiarism allegations, forcing organisers to abandon their original games logo.
Tokyo's bid has also come under scrutiny after questions were raised about payments by the bid committee.
(Reporting by Elaine Lies; Editing by Robert Birsel)
