By Steve Kingstone BBC correspondent in Sao Paulo

Waldomiro Diniz was accused by a magazine of demanding illegal campaign contributions from a business man in Rio de Janeiro.

In the past President Luis Inacio Lula da Silva has been a strong critic of corruption in Brazilian politics.

This is the first such resignation since his Workers' Party took office in January last year.

Mr Diniz worked inside the presidential palace as an adviser on relations with Brazil's parliament but his career has ended amid accusations of illegal fund raising.

Lula had made a point of speaking out against corruption

The news magazine Epoca has alleged that while working for the state lottery in Rio de Janeiro, Mr Diniz demanded money from a would-be lottery operator.

He is accused of pocketing some of the cash himself and funnelling the rest into Workers' Party campaigns.

Presented with an apparently incriminating video tape Mr Diniz is said by the magazine to have admitted his guilt and the Brazilian government has moved quickly to contain the damage.

On Friday, President Lula sacked the adviser.

Officials confirmed that a police investigation will follow.

Politically it is an embarrassment for a president who was elected partly because of a reputation for honesty.

Lula will hope the sacking draws matters to a close but opposition politicians are scenting blood, they want to know more about the working relationship between Mr Diniz and Jose Dirceu, the president's influential chief of staff.

Mr Dirceu is reported to have recommended the adviser. One opposition senator has called on Lula to remove his chief of staff while the matter is investigated.