Lee Anderson was appointed Tory deputy chairman nearly a year ago.
The move came just minutes before the pair joined around 60 Conservative MPs in backing amendments aimed at toughening up the flagship legislation.
An amendment tabled by veteran Conservative backbencher Bill Cash, which would have allowed the government to defy international law, was defeated by 529 votes to 68.
A second amendment in the name of former immigration minister Robert Jenrick, which would have made it harder for those facing deportation to appeal, was also defeated by 525 votes to 58.
If only half the Tory rebels vote with the opposition parties against the full bill when it comes back to the Commons tomorrow, it will be killed and Sunak’s premiership will be in tatters.
Anderson, the controversial MP for Ashfield, was appointed deputy chairman in February last year.
Fellow Red Wall MP Clarke-Smith only took up the post two months ago.
In a joint resignation letter to the PM, they said: “We commend your work on illegal immigration so far and your commitment to implementing the will of the British people.
“The last thing either of us wants to do is to distract from this.”
However, they suggested that despite their support for the rebel amendments aimed a strengthening the bill, they will still vote for the legislation in its entirety when it comes back to the Commons tomorrow.
My letter regarding tonight’s amendments. pic.twitter.com/EyneeRy4B9
— Brendan Clarke-Smith MP (@Bren4Bassetlaw) January 16, 2024
Lib Dem home affairs spokesman Alistair Carmichael said: “Sunak’s Rwanda scheme just won’t work - and even the deputy chairmen of his own party know it.
“Rishi Sunak has yet again been embarrassed by his own MPs.
“If the prime minister can’t even settle squabbles in his own party, how can he be expected to run the country?”