Beleaguered Veterans Secretary Eric Shinseki has stepped down after being summoned for a showdown meeting with President Barack Obama at the Oval Office.
Mr Obama said: "A few minutes ago Secretary Shinseki offered me his own resignation. With considerable regret, I accepted."
The president also said he would leave it up to the Justice Department to determine if there had been any criminal wrongdoing in the healthcare scandal engulfing the Veterans Affairs agency.
Claims surfaced last month that up to 40 veterans may have died while awaiting treatment in the Arizona healthcare system, spawning a nationwide inquiry.
Mr Shinseki led the agency for five years Before the Oval Office meeting Mr Obama told ABC he planned to have a "serious conversation" with Mr Shinseki, who led the agency for five years, about his "capacity" to do the job.
Sky News' US correspondent Amanda Walker, in Washington DC, says that at the beginning of his presidency Barack Obama said government needed to be "smarter and better".
Five years on and a litany of bureaucratic failures later - there's little sign of that happening.
Like the National Security Agency revelations and the failed healthcare rollout, this latest saga is being read - certainly by Republicans - as another Obama management disaster.
Republicans (and politically vulnerable Democrats) had called for him to go Wounded heroes and failed healthcare are two very emotive topics that strike at the heart of American values and concerns.
Mr Shinseki may have gone but the problems at the VA remain.
Ultimately, says our correspondent, the pressure is on the president to put this right.
Mr Obama has appointed Sloan D Gibson, currently deputy Veterans Affairs secretary, to run the department on an interim basis.
Appearing at a conference for homeless veterans in Washington DC earlier on Friday morning, Mr Shinseki apologised.
Claims of mistreatment for America's veterans were political plutonium The retired four-star general said he would oust the leadership of the Phoenix hospital at the centre of the affair.
He told the event: "We now know that VA has a systemic, totally unacceptable lack of integrity within some of our veterans health facilities."
Republican and Democratic lawmakers had been demanding he quit over the controversy.
But right up until the last minute, Mr Shinseki had given no sign that he would step down.
An interim report this week found that up to 1,700 military veterans were "at risk of being lost or forgotten" after being kept off waiting lists amid "significant delays" at the Phoenix clinic.
The Veterans Affairs inspector general is now investigating facilities nationwide.
The government-run system provides medical care to about 6.5 million US veterans annually.
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