The Prime Minister has dismissed Iain Lees-Galloway as a minister and he will no longer stand as a candidate in September's election.
It came after an allegation was received by National Party leader Judith Collins yesterday that Mr Lees-Galloway had had an "inappropriate relationship" with a person who had previously worked in his office and worked in his agencies.
Jacinda Ardern said in a hastily arranged media conference this morning the relationship was consensual.
"His position as a minister was untenable," she said. "The minister has shown a lack of judgement over a period of 12 months."
When asked if the employee was a junior staffer or an intern, Ms Ardern said at the time the person was "not the latter".
While the media conference was ongoing, Mr Lees-Galloway released a statement saying he acted "completely inappropriately in my position and can not continue as a Minister".
"I have apologised to my family for letting them down. I also apologise to anyone who has been hurt by my actions."
Ms Ardern said that at the time of the relationship the person was not in Mr Lees-Galloway's office, but was in one of his agencies.
"I do accept this has happened in a highly charged political environment," she said.
Ms Ardern spoke of Mr Lees-Galloway's work on pay equity and workplace reforms, but said a standard and a culture should be maintained by a Minister "and he has not done this in this case".
Labour Party President Claire Szabó said the party would move swiftly to select a new Palmerston North candidate.
"We will open nominations shortly and aim to select a candidate as soon as possible."
The Prime Minister said National leader Judith Collins told her yesterday she received an email that related to Mr Lees-Galloway.
"At around 3pm my office received an email directly from a third party alleging that the minister had an inappropriate relationship with a former staffer who worked in one of his agencies," Ms Ardern said.
"At around 5.45pm last night I sat down with the minister and put a range of questions and allegations to him. He confirmed that a consensual relationship had occurred, that it involved someone who had previously worked in his office and had been based in one of his agencies.
"In undertaking this relationship he has opened himself up to accusations of improperly using his office."
The former Immigration, Workplace Relations and ACC Minister is the electorate MP for Palmerston North. He was also deputy Leader of the House. He entered Parliament in 2008.
Mr Lees-Galloway's public Facebook page and Twitter have been deleted today.
Carmel Sepuloni will now be Minister for ACC, Andrew Little will become the Minister for Workplace Relations and Safety and Kris Faafoi will become Minister for Immigration.
This morning, Ms Collins revealed in media interviews that she had received an allegation about a Labour Party MP and passed the information on to Prime Minister Jacinda Ardern. Ms Ardern then announced she would be holding a press conference.
The situation comes after several MPs have resigned recently, including National's Andrew Falloon, who allegedly sent sexual images to young women.