Ukip's only MP Douglas Carswell is quitting the party to become an independent MP for Clacton.
Mr Carswell said he was leaving "amicably" and that there will be no need to call a by-election constituency as he will not be switching allegiance to another party.
However the major Ukip donor Arron Banks told ITV News that Mr Carswell should run again and confirmed that he intended to stand against him.
Mr Carswell left the Conservative party to join Ukip in 2014.
The resignation comes after a public row with Mr Banks, Ukip's biggest financial backer and a close ally of former leader Nigel Farage.
Earlier this month Mr Banks said he could trigger a by-election in Clacton using a recall petition and stand against Mr Carswell.
After Mr Carswell announced he was quitting on Saturday, Mr Banks responded by tweeting a smile emoji and a green tick.
He told ITV News that the MP should trigger a fresh by-election to decide if he stays on after leaving the party.
"I think he stood as Ukip MP and now he should stand an as independent and take it back to the voters."
Mr Carswell announced his resignation on his blog and said Ukip has now achieved its goal of getting Britain out of the European Union.
He said while Ukip has not won many seats in Parliament, "in a way, we are the most successful political party in Britain ever".
He added: "I will leave UKIP amicably, cheerfully and in the knowledge that we won."
The MP tried to play down tension with his former party, telling ITV News "There are good people in Ukip and I wish them well."
He also insisted that he did not need to trigger a by-election - as he did when he switched to Ukip - as he had not joined another party but was instead sitting as an independent.
Former Ukip leader Nigel Farage reacted to the announcement by tweeting: "Carswell has jumped before he was pushed. He was never UKIP and sought to undermine us. He should have gone some time ago."
Mr Carswell is now facing calls from Mr Banks' supporters to call a by-election so the party donor can stand against him.
Andy Wigmore, a spokesman for Mr Banks, said: "The net has been closing in - there is a Ukip National Executive Committee meeting on Monday and he knew he was for the chop, so jumped.
"He should call a by-election and Arron will stand against him."
Mr Farage recently said the party should kick out Carswell calling him a "Tory Party posh boy."
Mr Farage unleashed his attacks on Mr Carswell as the row heated up over claims that the MP played a role in blocking a knighthood for the former leader.
Leaked emails showed Mr Carswell joked that Mr Farage should be given an OBE "for services to headline writers".
The MP then followed this up with a provocative late-night tweet saying "Knight night".
This prompted Mr Banks to declare he is ready to stand against Mr Carswell in the 2020 general election.
Mr Carswell was re-elected in Clacton at the 2015 General Election with a majority of 3,437, beating the Tories into second place.
But that victory was secured on a more slender majority than the 12,404 he achieved in the 2014 by-election, sparked by his defection to Ukip.
Ukip leader Paul Nuttall said the party has not "benefited financially or organisationally" from having Douglas Carswell in Westminster.
"With this in mind, his departure will make no difference to my ability or focus on delivering the reforms I promised when elected as leader," he added.