Victorian Corrections Minister Steve Herbert quit cabinet because the furore over taxpayer-funded chauffeur rides for his dogs had become a "distraction".
He will move to the backbench immediately and take a pay cut of more than $100,000 and will quit politics from the next election.
Mr Herbert admitted sending his ministerial driver to pick up dogs Patch and Ted and ferry them more than 120 kilometres between his city and country homes while he was at work.
"Government is more important than any individual and I have been concerned that events over the past weeks have served as a distraction," Mr Herbert said in a statement on Wednesday.
"I have tendered my resignation to Premier (Daniel) Andrews.
"I will not be nominating for, or contesting, the 2018 state election."
Mr Andrews had stood by Mr Herbert but the upper house MP visited the premier to resign on Wednesday morning.
"I accepted the decision that he'd made, I accepted the resignation that he offered me, I thanked him for his service and I thanked him for acknowledging that he had made a very significant error," Mr Andrews said.
"He's paid a high price for that error and I wish him well in the future."
Mr Herbert announced on Tuesday he would pay back $192.80 for the petrol costs of transporting Patch and Ted "once, possibly twice" between his homes in Parkdale and Trentham.
But the opposition on Wednesday claimed he was lying and "it was well known that this was a regular weekly event during sitting weeks".
"He didn't even ask the drivers, he didn't even check with his own staff," opposition leader Matthew Guy said.
"His excuses are unbelievable.
"That's why the ombudsman should investigate."
Mr Herbert said his ministerial drivers' logs couldn't shed any light on how many trips his dogs took - which the opposition said was an "unbelievable excuse".
Victorian ministerial drivers' logs record the date, speedometer reading, business and personal kilometres travelled, starting location and destination, the passenger, and the purpose of each trip.
Western Victoria Region MP Gayle Tierney has been promoted from the backbench to take over as Minister for Corrections, Skills and Training.
"I believe there are a number of challenges but I'm ready to roll up my sleeves straight away and receive briefings in my portfolio area," Ms Tierney said.
She becomes Victoria's fourth Corrections Minister since February.
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