Lord Oakeshott has said he quitting the Lib Dems and taking a "leave of absence" from the House of Lords after a row over the party's leadership.
He said the Lib Dems were "heading for disaster" under Nick Clegg and had lost their "roots, principles and values".
The peer, once close to Vince Cable, commissioned polls suggesting the party would do better without Mr Clegg.
Nick Clegg accused him of seeking to "undermine" the Lib Dems and warned he faced disciplinary action.
Business Secretary Vince Cable, who is currently in China on government business, has distanced himself from the polls but the peer suggested that he had told Mr Cable about their findings "several weeks ago"
The row comes after the Lib Dems' dire performance in European elections.
Mr Clegg has faced calls to step down from 300 activists while a number of constituency associations, including Liverpool and Cambridge, are to hold meetings to discuss their leader's future.
'Unacceptable'In a statement, Lord Oakeshott said he was leaving the party "with a heavy heart" and issued a warning to the the Lib Dems about their future prospects.
"I am sure the party is heading for disaster if it keeps Nick Clegg; and I must not get in the way of the many brave Liberal Democrats fighting for change," he said.
He suggested, under Mr Clegg's leadership, the Lib Dems had become a "split the difference centre party, with no roots, no principles and no values" rather than a "radical, progressive party".
He said the message behind Mr Clegg's "dire approval ratings year after year in all national polls, and Thursday's appalling council and European election results is crystal clear".
"We must change the leader to give Liberal Democrat MPs their best chance to win in 2015."
He added: "I am sorry I have so upset and embarrassed my old friend Vince Cable and that we were not able to talk before he issued yesterday's statement from China."
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Nick Clegg said Lord Oakeshott was seeking to undermine his party's fortunes
Mr Clegg had earlier on Wednesday said it was "wholly unacceptable" that a senior member of the party "rather than trying to go out and win votes, was spending money and time trying to undermine the fortunes of the party".
The Lib Dems have said they are "100% sure" that Mr Cable played no part in the poll and that the business secretary took "proactive steps" to denounce it.
In his statement, Lord Oakeshott suggested that he had told Mr Cable about the poll findings "several weeks ago" before the outcome of European elections and before they were leaked to the media on Tuesday.
It emerged on Tuesday that Lord Oakeshott had paid for an ICM poll which suggested the Lib Dems would pick up votes in four seats, including Mr Clegg's own Sheffield Hallam constituency, if Mr Cable or other figures replaced Mr Clegg as leader.
It also suggested that the party was on course to lose Sheffield Hallam and three other seats - Cambridge, Redcar, and Wells - next year unless there was a change at the top.
The polls, conducted without Mr Clegg's knowledge, were taken in April and early May.
Respondents were asked who they intended to vote for in 2015 and whether it would make a difference "if Nick Clegg stepped down as Liberal Democrat leader and Business Secretary Vince Cable moved into the job".
'Distraction'The same questions were asked to gauge how people would vote if Mr Clegg were replaced by either party president Tim Farron or Chief Secretary to the Treasury Danny Alexander.
Although the polls suggested there would be a rise in support for the Lib Dems if any of the three men replaced Mr Clegg, it suggested the party could still struggle to retain any of the seats.
On Tuesday Mr Cable described Lord Oakeshott's actions as "totally inexcusable and unacceptable".
"Commissioning and publishing polls without the consent of the Member of Parliament, as in the case of Sheffield Hallam, is utterly reprehensible," he said on Tuesday.
"Public speculation about the leadership is an unwelcome distraction, and as I made absolutely clear yesterday there is no leadership issue as far as I'm concerned."
A separate poll by the Lib Dem voice website on Tuesday suggested 39% of party supporters wanted Mr Clegg to step down, with 54% backing him.
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