Sten Tolgfors denied any wrongdoing and insisted the plans to help Saudi Arabia build a facility for anti-tank weapons were consistent with a 2005 military agreement between the two countries.
Tolgfors, defense minister in the center-right government since 2007, said he had planned to resign anyway, though at a later date.
"The media reports in recent weeks have facilitated and hastened my decision," he told reporters in Stockholm.
Tolgfors was criticized after Swedish public radio, citing leaked documents, reported that Swedish military agencies were in talks to help Saudi Arabia build a facility for repairs and modifications of anti-tank weapons.
Sweden has no ban on weapons exports to Saudi Arabia, but the reports suggested the deal was set up in a way to avoid a public discussion on the issue.
Tolgfors defended the plans, saying they were in line with the military cooperation agreement signed by the two countries in 2005 and renewed in 2010.
Still, calls for him to resign mounted as the left-wing opposition accused the government of trying to cover-up its involvement in the Saudi plans.
Peace activists who oppose Sweden’s military exports say it’s particularly improper for the country to strike military agreements with non-democratic regimes.
Two criminal investigations were started: One to find out whether a shell company was set up to avoid any direct links between a Swedish military agency and the Saudi regime, and another to determine whether the document leak was a breach of national security.
Prime Minister Fredrik Reinfeldt said Infrastructure Minister Catharina Elmsater-Svard would take over Tolgfors’ defense portfolio until a permanent replacement is appointed.