In a statement posted on her Twitter feed, she said: "With deep regret I have this morning written to the Prime Minister & tendered my resignation. I can no longer support Govt policy on Gaza."
Lady Warsi became the first Muslim to sit in the Cabinet when she was made Conservative Party co-chairman by David Cameron following the 2010 general election.
She was subsequently moved to the post of Minister of State at the Foreign Office and Minister for Faith and Communities in Mr Cameron's 2012 re-shuffle in a move widely regarded as a demotion.
Lady Warsi's resignation comes amid growing disquiet among some Tory MPs that the Government has not taken a firmer line over Israel's incursion into Gaza.
She has signalled her own concern about what was happening in a series of comments on her Twitter feed in recent days.
In one she wrote: "Can people stop trying to justify the killing of children. Whatever our politics there can never be justification, surely only regret #Gaza."
In another just three days ago she said: "If there is a community meeting or protest in relation to Gaza happening near you I'd like to know, please tweet me the details."
London Mayor Boris Johnson paid tribute to her, saying he hoped she would make a return to the Government soon.
"I have very great respect for Sayeeda she has done a great job for us and I hope she will be back as soon as possible," he said during an LBC radio phone-in.
While Mr Johnson - who described himself as a "passionate Zionist" said that politicians across the political spectrum were horrified at what had been happening in Gaza - he went on to condemn the Israeli action as "disproportionate" - a word Mr Cameron and Foreign Secretary Philip Hammond have consistently avoided.
"I can't for the life of me see how this can be a sensible strategy." he said. "I think it is disproportionate, I think it is ugly and it is tragic and I don't think it will do Israel any good in the long run."