Womens' Affairs Minister Pansy Wong has resigned from Cabinet over questions on her use of her Parliamentary travel perk.
Mrs Wong has been under pressure since Tuesday when it was revealed she had used her ministerial title when signing her name as a witness to a business deal involving her husband.
In a statement, Mrs Wong said her decision followed questions about the use of her parliamentary travel entitlement to pay for her husband to travel within China at the end of 2008.
"Although the trip was a holiday, my husband did conduct some business.
"Further, I am not able at this point to give the Prime Minister an assurance that this is a one-off situation.
"As a Member of Parliament it is my responsibility to ensure that the travel entitlement is used within the rules and that does not appear to be the case on this occasion.
"Given that, the appropriate and honourable thing to do is to offer my resignation to the Prime Minister. "
The Prime Minister says he is extremely disappointed to lose Pansy Wong as a Cabinet minister. He says he expects high standards from his ministers, and believes Mrs Wong has taken the appropriate step in resigning.
Mr Key says it's important that MPs and Ministers treat taxpayer money with the utmost respect.
The Prime Minister's office confirmed on Friday it was investigating the possible use of Mrs Wong's travel entitlement to pay for the trip to China where the document was signed.
If the investigation finds she misused her parliamentary travel entitlements she will repay any money she may have used improperly.
Labour Party leader Phil Goff says the Mr Key totally mis-judged the row, and has been proven wrong.
"It's the role of Opposition to hold the Government up to scrutiny, that is our legitimate role and no level of abuse by the prime minister, his ministers or his staff should deter an oposition from doing their job.
"We did our job, the consequences of that are now obvious."
Mr Goff says there can be no excuse for any MP abusing their travel privileges, and if there is evidence of repeated abuse then Mrs Wong should resign from Parliament altogether.