Mr Nicholls, a junior minister under Margaret Thatcher, announced his departure after meeting the Conservative leader. He was influential in persuading Mr Hague to sharpen the Tories' demands for a renegotiation of the Treaty of Rome, which led party grandees, including John Major, Michael Heseltine and Kenneth Clarke to warn that it could take the Conservatives a step too far to support Britain withdrawing from Europe.
Although official Tory policy is to oppose entry to the euro for the lifetime of the next parliament, Mr Nicholls, 50, is close to those who would prefer Britain to be out of the EU and would like to neutralise the UK Independence Party by adopting its tough line.
Mr Hague refused to adopt Mr Nicholls' preferred stance of saying "never" to euro entry.
In his resignation letter, the Teignbridge MP said: "The time has come for me to move on. Many of the 1997 intake are on the front bench and our prospects are ... brighter. I would like to be able to return to the backbenches and to be able to speak on a wider range of subjects that are relevant for my constituency, which my frontbench responsibilities prevent me doing."
In reply, Mr Hague said: "I am very sorry you have decided to step down ... although I fully understand your reasons."
Mr Nicholls, a solicitor, with a majority of 281, was a junior employment minister between 1987 and 1990, and a junior environment minister in 1990. His ministerial career ended in 1990 when he was caught drink-driving during the Conservative Party conference. He was fined pounds 250 and banned for a year.
A spokesman said Mr Nicholls would be replaced at agriculture by Malcolm Moss, currently a Northern Ireland spokesman. Mr Moss will be replaced by John M Taylor, a Tory whip.Reuse content