It will spark a by-election and raised speculation Nigel Farage, the Ukip leader, could stand in the forthcoming contest in Newark near Nottingham.
The Conservatives won the seat at the last election with a majority of 16,152. However, with Ukip expecting a surge of support in the European parliamentary elections on May 22, Mr Farage may be optimistic of claiming a victory.
Asked if he would stand, the Ukip leader said he would "seriously" consider it, if the by-election were held after the Euro poll; it is thought the earliest it could be held is May 29.
A Ukip source said: "We are watching the situation with very close attention."
Mr Mercer faced allegations that he had set up an All-Party Parliamentary Group at the request of undercover reporters posing as lobbyists seeking to lift Fiji's suspension from the Commonwealth. Mr Mercer is said to have tabled Commons questions and offered a Westminster security pass after signing a deal with a lobbying firm, which paid him £4000 for seeking the readmission of Fiji. The Commons Standards Committee is set to ban the politician for six months.
He said: "As an ex-soldier I believe that when I have got something wrong you have got to fess up and get on with it. What's happened has happened and I'm ashamed of it." Mr Mercer said he was going to do what he could to "put it right" for the people of Newark and for his family.
He added: "With a great heaviness of heart - and I'm hoping that the people of Newark will be able to tolerate me in the future - I'm going to resign my seat of God's county of Nottinghamshire in the town of Newark and I hope that my successor, who has been well and carefully chosen, will be the Conservative candidate."