The speaker of the House of Commons resigned over an MPs' expenses scandal which has plunged Britain into its worst political crisis for years and outraged voters.
Michael Martin became the first person to be forced out of the prestigious post since 1695 after losing moral authority among lawmakers, 23 of whom had signed a motion of no confidence in him.
Afterwards, Prime Minister Gordon Brown said it was vital for British politics to open itself up to more outside scrutiny.
"Westminster cannot operate like some gentlemen's club where members make up the rules and operate them among themselves," he told his monthly press conference, which was brought forward after the speaker's departure.
The leaders of the main parties later agreed on a series of interim changes to the allowances system, including severely limiting the items MPs could claim for on their second homes, pending an independent review.
Although there had been questions over his leadership for years, Martin's fate was sealed by his resistance to reform and a chaotic performance when faced with complaints against him on Monday.
In a 30-second statement on Tuesday, he said: "In order that unity can be maintained, I have decided that I will relinquish the office of speaker on Sunday June 21." A new speaker will be elected on June 22.
By-election in Labour seat
Martin, a former sheet metal worker and trade unionist, is also stepping down as a lawmaker in his home city of Glasgow, Scotland, his spokeswoman said.
That will leave Brown's struggling Labour government to fight a by-election in what was once a safe seat but could now be a magnet for anti-sleaze campaigners.
Revelations about lawmakers' lavish expense claims have dominated the headlines for nearly two weeks, prompting public fury as Britain struggles with its worst recession since World War II.
The Daily Telegraph newspaper has published leaked documents showing how MPs claimed from the public purse for everything from food and drink to maintenance work for a swimming pool, a tennis court and even a castle moat.
Both Labour and the main opposition Conservative party have pledged a crackdown.
After his press conference, Brown issued proposals for reforming the allowances system which included plans for a new, independent Parliamentary Standards Regulator.
He also said MPs would not be allowed to set their own pay and that their expense receipts from the last four years would be re-examined independently.
In addition, Brown said no lawmaker who had defied expenses rules would be allowed to stand for his Labour Party at the next general election.
House speaker 'lost authority'
In a separate statement, Martin revealed party leaders had agreed Tuesday on interim changes to the allowances system pending recommendations from the independent Committee on Standards in Public Life on more widespread reform.
MPs would no longer be able to claim for furniture, cleaning and household goods for their second homes, while claims for mortgage interest payments or rent would also be capped, the speaker told lawmakers.
News of Martin's departure was welcomed by MPs from across the political divide.
Stuart Bell, a Labour lawmaker and Martin ally, said: "A speaker of the House of Commons must have authority... Michael Martin clearly lost it yesterday."
Douglas Carswell, the Conservative lawmaker who led calls for Martin to quit, said the resignation "gives us a unique opportunity now to create a new House of Commons that is not a caste apart.
"We have to modernise the building and make it suitable for the age of YouTube."
Brown brushed off suggestions that the expenses crisis could trigger a general election. He must go to the country before the middle of next year.
"It's a problem that cannot be changed by a few people changing the name plates... of the constituency they represent," he said, when asked about a possible early poll.