Sajid Javid has resigned as chancellor amid a cabinet reshuffle, with Rishi Sunak taking on the role.
Javid was told he would have to sack his advisors if he wanted remain in the role, sources told the Press Association.
But the Bromsgrove MP, who was due to deliver the Budget in a month’s time, said “no self-respecting minister” could accept the conditions being imposed.
“He has turned down the job of chancellor of the exchequer,” a source close to Mr Javid told the PA.
“The Prime Minister said he had to fire all his special advisers and replace them with Number 10 special advisers to make it one team.
“The chancellor said no self-respecting minister would accept those terms.”
Mr Javid had walked smiling into Number 10 in a sign that he expected to remain in place ahead of the March 11 Budget.
His departure came after Julian Smith was axed as Northern Ireland secretary, Andrea Leadsom was sacked as business secretary and Theresa Villiers lost her job as environment secretary.
Other senior ministers axed by Boris Johnson included Geoffrey Cox from his post as attorney general and Esther McVey as housing minister.
Shadow chancellor John McDonnell said Javid’s resignation had left the UK Government in crisis.
“This must be a historical record with the government in crisis after just over two months in power,” he said.
“[Johnson’s adviser] Dominic Cummings has clearly won the battle to take absolute control of the Treasury and install his stooge as chancellor.”