The Prime Minister's tenuous grip on power was weakened further when Mr Purnell, one of Labour's rising stars, became the third minister to walk out of the Cabinet in as many days.
He urged Mr Brown to stand down, saying bluntly that Labour was heading for defeat if he led the party into the general election.
The dramatic move, which came as the polls closed in yesterday's local and European elections, will severely undermine Mr Brown's plans to fight back after what are expected to be disastrous results for his party.
It could prove a fatal blow to the Prime Minister and may be followed by other resignations today.
Mr Purnell, a former aide to Tony Blair, told Mr Brown in his resignation letter: "I owe it to our party to say what I believe no matter how hard that may be. I now believe your continued leadership makes a Conservative victory more, not less likely.
"That would be disastrous for our country. This moment calls for stronger regulation, an active state, better public services, an open democracy. We therefore owe it to our country to give it a real choice. We need to show that we are prepared to fight to be a credible government and have the courage to offer an alternative future.
"I am therefore calling on you to stand aside to give our party a fighting chance of winning. As such I am resigning from government. The party was here long before us, and we want it to be here long after we have gone. We must do the right thing by it."
Mr Purnell, 39, who has been tipped as a future Labour leader, insisted he was not seeking the leadership or acting with anyone else. "If the consensus is that you should continue, then I will support the government loyally from the backbenches. But I do believe that this question now needs to be put," he said.
In another setback for Mr Brown, Barry Sheerman, a senior Labour backbencher, called for a secret ballot among Labour MPs on Monday. He said: "You cannot have a leader who does not have the confidence of the Parliamentary Labour Party. Many MPs feel that Gordon just does not get it."
Graham Allen, a former Labour whip, also called on Mr Brown to consider his position. He hoped that he would "take the honourable way out so the party can progress with a leadership election".
Labour backbench rebels plotting Mr Brown's downfall may hand in a "go now" letter to Downing Street today.
All eyes will now be on Alan Johnson, the Health Secretary and the man most likely to take over if Mr Brown is toppled. There were signs that last night that his allies are starting to canvass support for him.
Other Blairite ministers, including David Miliband, John Hutton, Caroline Flint and Liam Byrne, made clear last night they would not resign.
Downing Street said Mr Brown was "disappointed" by Mr Purnell's departure. He was told shortly before 10pm – after Mr Purnell had told newspapers.
David Cameron, the Tory leader, said: "In a deep recession and a political crisis we need a strong united government. Instead we have a Government falling apart in front of our eyes. Britain deserves better than this."
Brown aides warned Labour rebels they would plunge the party into "civil war" if they pressed ahead with their campaign to oust him.
The beleaguered Prime Minister spent yesterday drawing up a fightback based on a sweeping cabinet reshuffle, possibly today, a shake-up of Whitehall departments and new policy initiatives focused on the economy, public services and constitutional reforms to create "a new politics" after the MPs' expenses scandal.
Rumours swirled around Westminster of further ministerial resignations yesterday following the departure of the Home Secretary, Jacqui Smith, and the Communities Secretary Hazel Blears. But aides of Mr Purnell denied he was planning to quit.
The pressure on Mr Brown is expected to intensify when the results of the council elections emerge from lunchtime today, with European election results to follow on Sunday. There were predictions that Labour's vote in the council polls could fall below 20 per cent.
There are growing signs that the Chancellor, Alistair Darling, will be moved from the Treasury against his will in the reshuffle. Friends say he may leave the Cabinet rather than move to another post.
Moving Mr Darling would open the way for Mr Brown to install at the Treasury his long-time ally Ed Balls, the Schools Secretar, at the Treasury. There was speculation that Mr Purnell had been offered Mr Balls's job – another sign that the Schools Secretary will be promoted to Chancellor.
Mr Balls's appointment would prove unpopular with Blairite MPs but Mr Brown will try to keep them sweet by promoting from their ranks key Blairites. Those tipped for bigger jobs include Ms Flint, Mr Byrne and Pat McFadden.
Mr Brown will also promise more Blairite reforms to tailor health and education to individual needs as part of his policy-based fightback, designed to answer criticism that the Government has no "forward agenda".
One close ally told The Independent: "He will offer an alternative to a damaging leadership contest and the risk of plunging the party into a civil war."
The Prime Minister Mr Brown will pledge to rush through a raft of new policies before a general election next year, including a major housebuilding programme, an "innovation fund" to support new companies, more college places and apprenticeship for school-leavers, and more investment in "green energy".
Resignation letter
Dear Gordon,
We both love the Labour Party. I have worked for it for 20 years and you for far longer. We know we owe it everything and it owes us nothing.
I owe it to our Party to say what I believe no matter how hard that may be. I now believe your continued leadership makes a Conservative victory more, not less likely.
That would be disastrous for our country... I am therefore calling on you to stand aside to give our Party a fighting chance of winning. As such I am resigning from Government.
I am not seeking the leadership, nor acting with anyone else. My actions are my own considered view, nothing more. Thank you for giving me the privilege of serving.
Yours,
James Purnell
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