Giles Chichester, leader of the Tory MEPs, has resigned from his position following controversy over his financial dealings.
The resignation comes just hours after David Cameron personally stepped into the affair and demanded to see full details of his accounts.
Mr Chichester, chairman of the Conservatives in the European parliament, funnelled £445,000 of his European parliament expenses into a family business in which he and his wife are sole directors.
But he provoked scorn and consternation today by describing the mistake as a "whoops-a-daisy".
He then went on to claim he was unaware of changes to the rules on MEPs expenses, despite the fact he is the man charged by Mr Cameron with overhauling the system.
"It is embarrassing, not least, because I have introduced a new code of guidelines for my Conservative colleagues for expenses," Mr Chichester told ITV West Country.
"Here I am leading that process for the last couple of months and whoops-a-daisy I am shown up to have made a mistake. OK. Hands up, mea culpa and I am putting it right."
He continued: "At all times I have acted in good faith within the original parliamentary rules and what I believed the current rules of the European parliament still to be.
"I recognise that it was my responsibility to have learnt about the change in rules. I confirm that there has been no misappropriation of any funds."
Mr Cameron's team is demanding full details of Mr Chichester's financial dealings, which they expect to receive tomorrow tonight.
Mr Cameron is under pressure from those within his own party to come down hard on Mr Chichester with a recent posting on the Conservativehome website saying: "The biggest electoral test between now and the general election will be 2009's European elections.
"Our MEPs could be vulnerable on a number of fronts and it is vital that David Cameron acts now to deal with some of the ethical questions surrounding them."
The potential for embarrassment over the issue is immense. Mr Chichester was the man Mr Cameron turned to after the revelations about disgraced Tory MP Derek Conway surfaced earlier this year.
Director of Open Europe, Neil O'Brien, said: "The Conservatives have made the right call. After such a clear breach of the rules, Chichester's position as leader in the European Parliament was clearly untenable."
"If this is serious enough to resign the leadership over, it is serious enough to warrant resigning as an MEP."
"The Conservatives would not be able to fight the next election as the anti-sleaze party if they are carrying someone who has been forced to resign over sleaze."