The Brexiteer said the prime minister's draft Brexit deal "does not honour the result of the referendum'' and she "could not look [her] constituents in the eye" over the plans.
Her departure comes amid a flurry of ministerial resignations, including Brexit secretary Dominic Raab, which raises major questions over the future of Ms May's leadership.
Westminster is braced for fresh resignations in the coming hours, as speculation mounts around the future of Brexiteer cabinet ministers such as Penny Mordaunt and Andrea Leadsom.
It also ramps up fears that furious Conservative MPs could topple Ms May by submitting enough letters of no-confidence to trigger a leadership contest.
In her resignation letter, Ms McVey said: "The British people have always been ahead of politicians on this issue, and it will be no good trying to pretend to them that this deal honours the result of the referendum when it is obvious to everyone that it doesn't.
"We have gone from no deal is better than a bad deal, to any deal is better than no deal.
"I cannot defend this, and I cannot vote for this deal. I could not look my constituents in the eye were I to do that. I therefore have no alternative but to resign from the government."
Her departure came moments before the prime minister was due to make a Commons statement in an attempt to sell her Brexit deal to MPs.
Ms May appeared to have cleared the first hurdle when senior ministers backed her draft deal with Brussels after a fiery five-hour meeting on Wednesday night.
But she was hit with a string of resignations on Thursday morning, amid a furious backlash from Brexiteer Tories and some Remainers, who accused her of breaking promises and leaving the UK subordinate to Brussels.
Brexit minister Suella Braverman and ministerial aide Anne-Marie Trevelyan became the latest to quit the government, in a wave that began with the early morning resignation of Northern Ireland minister Shailesh Vara.
The pound also plummeted after the shock ministerial resignations dealt a blow to Ms May's authority.
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