O'Neill, a former Goldman Sachs economist who is known for coining the term BRICS (the acronym for the emerging economies of Brazil, Russia, India, China and South Africa), first cited problems with Prime Minister Theresa May's reportedly lukewarm attitude towards China over the summer.
Scroll down: Is Theresa May committed to the Northern Powerhouse?
He was also a key ally of former chancellor George Osborne and architect of the Northern Powerhouse project. Osborne, who has established a new think tank to continue his work on revitalising the economy of northern England from his new seat on the backbenches, is also thought to be concerned that the project may not be a priority of Theresa May's new government.
In his resignation letter, O'Neill cited both China and the Northern Powerhouse, though sought to dampen speculation he did not believe May and Hammond were committed to his policies.
In a letter to the Prime Minister, he wrote: "I primarily joined [the government] for the specific purpose of helping deliver the Northern Powerhouse, and to help boost our economic ties with key growing economies around the world, especially China and India and other rapidly emerging economies.
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"The case for both to be at the heart of the British economic policy is even stronger following the referendum, and I am pleased that, despite speculation to the contrary, both appear to be commanding your personal attention. I am leaving knowing that I can play some role supporting these critical initiatives as a non-government person."
Osborne hailed his former colleague as "outside expert who made a big difference on the inside", adding his "work on devolution and the Northern Powerhouse, on China and India ... will bring lasting benefits."
O'Neill cited his official reason for leaving office as the passage of a United Nations agreement on antimicrobial resistance - a process which is the conclusion of a two-year review he was asked to lead in 2014. After the General Election, he was then officially brought into the government team as commercial secretary to the Treasury.
In response to his resignation Theresa May said: "You have made a significant contribution to driving forward the government’s work on delivering growth beyond the south east through the Northern Powerhouse and on promoting stronger economic links with emerging economies, including China and India. You have laid important foundations in these areas, and the government will build on them."
O'Neill also relinquished his affiliation to the Conservative party and will now sit as a non-affiliated crossbench member of the House of Lords.
Jim O'Neill was one of those rare things in British politics - an outside expert who made a big difference on the inside. He will be missed.— George Osborne (@George_Osborne) September 23, 2016