David Cameron has said he is "puzzled and disappointed" at the resignation of work and pensions secretary Iain Duncan Smith last night.
Stephen Crabb, formerly the secretary of state for Wales, was appointed Duncan Smith's successor on Saturday morning.
Duncan Smith published an open letter of resignation on Friday evening, citing pressure to make further cuts to disability benefits as the reason for his departure. It is the first major blow to George Osborne's Budget less than 48 hours after it was announced.
On Friday, Number 10 had said it "remain[ed] committed" to cutting disability benefits this parliament, despite increasing signs of a backbench rebellion.
In his Budget on Wednesday, Osborne said the government would spend an extra £1bn on disability, but changes announced a few days earlier had suggested the government would save £4.4bn by 2021.
These changes included alterations to Personal Independence Payments (PIP), which will replace Disability Living Allowance (DLA) in January 2017, that were expected to save £1.3bn.
Duncan Smith said these changes were "not defensible" in a Budget that benefited higher earning taxpayers.
"I have for some time and rather reluctantly come to believe that the latest changes to benefits to the disabled, and the context in which they've made, are a compromise too far. While they are defensible in narrow terms, given the continuing deficit, they are not defensible in the way they were placed within a Budget that benefits higher earning taxpayers," Duncan Smith wrote.
"Too often my team and I have been pressured in the immediate run up to a Budget or fiscal event to deliver yet more reductions to the working age benefit bill. There has been too much emphasis on money saving exercises and not enough awareness from the Treasury, in particular, that the government's vision of a new welfare-to-work system could not be repeatedly salami-sliced."
In Cameron's letter of response he said he was "puzzled and disappointed" Duncan Smith had chosen to resign and said the proposals announced by the Department of Work and Pensions a week ago had been "collectively agreed" by the Treasury, Number 10 and Duncan Smith himself.
The resignation puts pressure on Osborne to u-turn on the controversial disability cuts, adding to public anger on the changes announced in the Budget.
It could also prove to be an obstacle for Osborne in the Tory leadership race. Already bookies have said IDS' resignation has made Osborne more vulnerable as William Hill slashed its odds further on the chancellor becoming leader of the party.
Meanwhile, opposition leader Jeremy Corbyn has called on Osborne to resign and said the resignation revealed a government in "disarray" and that the chancellor had lost "credibility".
"The resignation of Iain Duncan Smith reveals a government in disarray and a chancellor who has the credibility to manage the economy in the interests of the majority of our people," Corbyn said in a statement.
"The Budget has exposed George Osborne's record of profound unfairness and economic failure. Not only must the cuts to support for disabled people be abandoned, but the government must change economic course. The chancellor has failed the British people. he should follow the honourable course taken by Iain Duncan Smith and resign."