The resignation comes days after Prime Minister Theresa May secured Cabinet backing for her Brexit plan.
It comes as the Prime Minister hopes to win over Tory Brexiteers after a backlash against her plans for leaving the European Union.
Mr Davis, who signed up to the strategy agreed at Chequers on Friday, quit on Sunday night.
In his resignation letter, Mr Davis told Mrs May that he believed "the current trend of policy and tactics" is making it look "less and less likely' that the UK will leave the customs union and single market,
The former Brexit secretary added: "The general direction of policy will leave us in at best a weak negotiating position, and possibly an inescapable one."
His junior ministerial colleague Steve Baker has also quit his role at the Department for Exiting the European Union (Dexeu).
The dramatic resignation has now prompted speculation that the Prime Minister could face a leadership challenge within days.