Helmut Linssen, treasurer of Merkel's party, the Christian Democratic Union (CDU) and for five years state finance minister for North-Rhine Westphalia, was accused of having stashed nearly a million Deutschmarks in an off-shore bank account.
A report in Stern magazine this week said the money was shuffled between trusts in the Bahamas and in Panama for years.
According to the report the cash was moved around from 1997 to 2004, but the transfers stopped before he became finance minister of North-Rhine Westphalia in 2005.
The 71-year-old, who has been CDU party treasurer since 2010, informed Merkel in a telephone call that he would quit.
“In the interests of my party and my family I have decided to ask the party leadership to elect a new treasurer at the upcoming party conference in April,” Linssen told Bild newspaper on Friday.
“I’ve always behaved correctly,” he said on Thursday. He said he had not evaded tax and the now defunct accounts had belonged to his parents.
CDU secretary-general Peter Tauber thanked Linssen for his long years of service.