She stepped down from the Labour government after controversy over her handling of a tenancy at a property she owns in east London.
In a letter to prime minister Sir Keir Starmer, Ms Ali said: “It is with a heavy heart that I offer you my resignation as a minister.
“I believe I took my responsibilities and duties seriously, and the facts demonstrate this.
“However, it is clear that continuing in my role will be a distraction from the ambitious work of the government.
“I have therefore decided to resign from my ministerial position.”
The BBC has reported that the row centred on her decision to end a fixed-term tenancy at a house she owns in east London, initially to sell the property, but later re-listing it for rent at a higher price.
It says this is something she was trying to outlaw under the Renters’ Rights Bill.
Ms Ali has maintained that she followed all legal requirements throughout the process.
A source close to Ms Ali told the BBC the house was put on the market in November 2024 with an asking price of £914,995, later reduced by £20,000 in February.
The i Paper, which first reported the story, said the property was only re-listed for rent after failing to sell.
It quoted a former tenant who said they received four months’ notice in November that their lease would not be renewed.
After moving out, they saw the property re-listed for rent at £700 more per month.
The prime minister responded to Ms Ali’s resignation by thanking her for her service.
Sir Keir told her: “You have led the government’s work to repeal the Vagrancy Act and made an important contribution to our mission to end homelessness.
“I know you will continue to support the government from the backbenches and represent the best interests of your constituents in Bethnal Green and Stepney.”
Opposition politicians and housing campaigners had called for her resignation.
Kevin Hollinrake, chairman of the Conservative Party, told the BBC: “It is right that Rushanara Ali has now quit the government following our calls for her to go.”
Ms Ali’s resignation was also welcomed by campaigners for renters.
Tom Darling, director of the Renters’ Reform Coalition, told the BBC: “Her position was completely untenable.
“The government must get on now and end no-fault evictions urgently so that no more tenants are subject to the kind of behaviour Rushanara Ali engaged in.”
In her resignation letter, Ms Ali reflected on her time in government.
She said: “I am proud to have contributed to the change this government has delivered in the past year.”
Ms Ali has served as the MP for Bethnal Green and Stepney since 2010.
