David Cameron has withdrawn the Tory whip from Derek Conway after the MP was reprimanded over the amount he paid his son for working as his researcher.
Mr Conway apologised after being reprimanded
Mr Cameron took the decision to exclude Mr Conway from the Conservative group of MPs at Westminster after chief whip Patrick McLoughlin spoke to Mr Conway.
Mr Conway said the decision was "understandable, if not inevitable".
The decision was made as Mr Conway faces more scrutiny over his elder son and a possible police inquiry.
It follows a probe by the Commons Standards and Privileges Committee, which found that Mr Conway overpaid his younger son Freddie.
The committee said the MP should be forced to pay back up to £13,161 of the amount paid to his son and recommended he be suspended from the House of Commons for 10 days.
Labour funding investigator
Mr Conway apologised unreservedly to MPs for "administrative shortcomings and the misjudgements I made" over Freddie's employment and pay and said he had let down his family "very badly indeed".
His elder son Henry Conway was mentioned by the committee as having a similar research assistant role before his brother took over.
However, the committee was unable to clarify his role as he was not the subject of the original complaint.
In a statement, Mr Cameron said: "The usual procedure in these cases is to leave the punishment to the House of Commons authorities.
"However, having asked the chief whip to speak again to Mr Conway and having personally reflected overnight, I have decided to withdraw the Conservative whip from Mr Conway."
He said that he had decided to withdraw the whip to make clear the behaviour was not acceptable.
Mr Cameron did not rule out Mr Conway re-taking the whip again in future but said he had "an awful lot of road to make up".
Mr Conway told the BBC: "I think the withdrawal of the whip was understandable, if not inevitable and I have no quarrel with that."
The whip ensures MPs vote in the way the party wants them to at important divisions. If the whip is withdrawn from an MP, it leaves him isolated in Parliament and effectively makes him an independent MP.
Meanwhile, the office of Parliamentary Standards Commissioner John Lyon confirmed he was now "considering" a complaint from Labour MP John Mann in relation to Mr Conway's payment of sums from his MP's staffing allowance to Henry Conway.
Duncan Borrowman, the Lib Dems' candidate for Mr Conway's Old Bexley and Sidcup seat, has also written to the police officer leading the investigation into Labour funding, Acting Commander Nigel Mawer, to look into the committee's findings.
However, a Scotland Yard spokesman said the Metropolitan police have not received a complaint about Mr Conway yet.
Roger Gale, Tory MP for North Thanet, said Mr Conway was a "good constituency member of Parliament and an honourable man" who was being accused by a Labour MP with "an axe to grind".
Asked what he thought was going on, Mr Gale said: "A witch hunt."
"A man has been told he's guilty until he can prove his innocence," he told BBC Radio 4's Today programme.
"If Derek Conway says his son did the hours which he said he did, I do not doubt his word."
Mr Conway was reprimanded by the Standards Committee after "no record" was found of Freddie Conway doing any work for him as a researcher.
The student was paid more than £40,000 for his three-year employment period.
Retired policeman and now BNP member Michael Barnbrook - whose original complaint prompted the investigation into Freddie Conway - also wants a second investigation into his brother.
From March 2003 until Freddie Conway took over, Henry Conway was paid about £10,000 per annum for 18 hours of work a week.
Derek Conway told the Commissioner for Standards that Henry Conway had assisted with computer work and his post, as well as helping his father to understand London issues.
Mr Conway paid Freddie Conway to work part time for him as a researcher while he was studying at Newcastle University - as well as receiving a salary of £11,773 a year, he was paid four one-off bonuses totalling just over £10,000.
MPs are given allowances to run their office and pay their staff and there are no rules to stop wives, husbands, sons, daughters and other family members working for them.