Yisrael Beytenu leader Avigdor Lieberman announced Wednesday that he was resigning his position as defense minister and exiting the coalition.
His resignation will take effect on Friday.
The dramatic announcement followed weeks of what has been described as "prolonged disagreements" with Prime Minister Benjamin Netanyahu over Israel's policy in the Gaza Strip and how best to handle Hamas' provocations.
Lieberman has also repeatedly locked horns with Education Minister Naftali Bennett (Habayit Hayehudi) over the issue.
The last straw was apparently Netanyahu's decision to agree to the latest Egyptian-brokered cease-fire with Hamas, which followed two days of the fiercest fighting between the IDF and the terrorist group since 2014.
The Prime Minister's Office issued a statement Tuesday saying that all cabinet ministers supported the decision to agree to a truce, but Lieberman's office was quick to issue a denial, saying the defense minister had demanded that Israel take action against Hamas and was overruled by the prime minister.
Officials privy to Tuesday's heated Diplomatic-Security Cabinet meeting said that afterward, Lieberman all but "shut down" and then "maintained radio silence."
In a press conference Wednesday announcing his decision, Lieberman said, "Yesterday's decision [to agree to a cease-fire] was a capitulation to terrorism, plain and simple. The government is buying short-term quiet at the cost of long-term harm to Israel's security."
He said he was aware his decision to resign would come "at great personal and electoral cost."
But he said that Israel's response to the latest flare-up in Gaza "fell short, to put it mildly," and this would impact other sectors as well.
"We had to condition any progress in Gaza on two things: the return of the Israeli captives held in Gaza and ending the border riots," he said
"We have to stop this unclear political and strategic line on these [security] issues."
Lieberman said he expected that both he personally and his party would face "harsh criticism from all over," and that early elections must be called as soon as possible. He said he has yet to approach the heads of the other coalition factions on the matter.
A senior Israeli minister said Lieberman's decision was "utterly irresponsible," adding, "If he goes through with it, he's truly unworthy of the position."
Yisrael Beytenu holds five Knesset seats. Political analysts said the party's exit from the coalition does not necessarily spell early elections, as the ruling coalition still numbers 61 MKs.
Bennett on Wednesday demanded to be named defense minister in Lieberman's place, saying that if Netanyahu rejects his demand, Habayit Hayehudi would also pull out of the coalition, a move that would spell early elections.
A senior Likud official said that Lieberman's resignation "does not necessarily mean we have to call elections in what is a sensitive security period."
He made no comment on Bennet's demand for the defense portfolio, saying, "At this immediate stage, Prime Minister Netanyahu will hold the defense portfolio."