Tory Douglas Carswell has defected to UKIP and quit as MP for Clacton, saying he will contest the subsequent by-election for Nigel Farage's party.
If he wins the support of voters he will be the first elected UK Independence Party MP in the Commons.
The maverick Eurosceptic backbencher said he did not believe Prime Minister David Cameron was "serious about the change we need" in Europe.
The PM described his defection as "regrettable" and "counterproductive".
Mr Carswell said the decision to jump ship from the Conservatives had given him "sleepless nights" but he wanted to see "fundamental change in British politics" and UKIP - a party he believed belonged to its members rather than a "little clique" of political insiders - could deliver it.
"This hasn't been an easy decision. I have been a member of the Conservative Party all my adult life. It's full of wonderful people who want the best for Britain.
"My local Conservative Association in Clacton is thriving. It brims with those I'm honoured to call my friends.
"The problem is that many of those at the top of the Conservative Party are simply not on our side. They aren't serious about the change that Britain so desperately needs.
"Of course they talk the talk before elections. They say what they feel they must say to get our support... but on so many issues - on modernising our politics, on the recall of MPs, on controlling our borders on less government, on bank reform, on cutting public debt, on an EU referendum - they never actually make it happen."
He said only UKIP could "shake up that cosy little clique called Westminster".
On Mr Cameron's pledge of an in/out EU referendum in 2017, after renegotiating powers back from Brussels, he said the prime minister's advisers had "made it clear that they're looking to cut a deal that gives them just enough to persuade enough voters to vote to stay in".
He added: "Once I realised that, my position in the Conservative Party became untenable."
Mr Cameron - who was not warned by Mr Carswell about his plan to defect - said: "It's obviously deeply regrettable when things happen like this, when people behave in this way.
"But it's also, in my view, counterproductive. If you want a referendum on Britain's future in the EU - whether we should stay or go - the only way to get that is to have a Conservative government after the next election.
"And that is what until very recently Douglas Carswell himself was saying."
Speaking exclusively to BBC political editor Nick Robinson in Glasgow, the prime minister said the by-election in Clacton would be held "as soon as possible" and he "wants to make sure there's a very strong Conservative campaign in that seat".
"I want to go early to Clacton for this reason: people in Clacton voted not just for Douglas Carswell, they voted for a Conservative government, for a Conservative member of Parliament," he added.
Analysis by Brian Wheeler and Iain Watson
Douglas Carswell's announcement took Westminster by complete surprise. UKIP had told everyone they were about to unveil a major new celebrity donor.
No-one expected a Conservative defector to be unveiled instead. The identity of the defector is, perhaps, less of a surprise - Mr Carswell has a long history of rebelling against his party and is known to be deeply disillusioned with what he sees as David Cameron's failure to clean up Westminster politics and deliver democratic reforms.
But it is Mr Carswell's decision to call a by-election in Clacton - rather than continuing to sit in the Commons under a different party banner - that will cause the biggest headache for Mr Cameron.
The prospect of defeat is real. And if it happens, expect more Conservative MPs to call for a pact - at least informally, seat by seat - with UKIP at next year's general election.
It will encourage Eurosceptic MPs to harden their rhetoric on a referendum and renegotiation. And for swing voters worried about the cost of living, they will hear the Conservatives - to use the prime minister's words - "banging on about Europe".
Technically the seat could be left vacant until the general election. But Mr Cameron cannot look like he is "running scared" on Europe.
In South Thanet the Conservatives selected a senior UKIP defector. They will have to trawl their membership lists to find another Eurosceptic to take on Mr Carswell.
Conservative MP Mark Pritchard - a fellow Eurosceptic - said Mr Carswell had been "flirting with UKIP for some time" and his defection would inflict "short-term" damage to the Conservative Party, as he may win the by-election.
But he said voters would realise a "vote for UKIP is a vote for Labour".
UKIP leader Nigel Farage, who this week was selected to fight South Thanet at the 2015 general election, shared the platform with Mr Carswell at his press conference.
He said the MP's decision was the "bravest and most honourable" he had seen in British politics.
The UKIP leader, who has been attempting for some time to convince MPs to join his party, told BBC News "there are others in Westminster having similar thoughts" to Mr Carswell.
The Clacton MP, who has a 12,000 majority, has been an outspoken critic of Westminster politics since being elected in 2005, calling for more democratic accountability such as open primaries to select candidates and recall elections for MPs who break the rules.
Explaining his decision to force a by-election - which he did not have to do in order to sit as a UKIP MP - he said: "The only honourable thing to do is to say to the people of Clacton, who I represent in Westminster, it's their choice."
Mr Carswell, who was an early supporter of Mr Cameron when he was bidding for the party leadership, said he had not spoken to the prime minister before announcing his decision.
The Labour Party said Mr Carswell's defection was a "a hammer blow" for Mr Cameron, which showed confidence in the prime minster was "collapsing inside a Conservative party which is divided and running scared of UKIP".
Former Conservative MP Bob Spink, who briefly sat as a UKIP MP after a row with his local Conservative Party in Castle Point, said he admired Mr Carswell's courage.
He told Jeremy Vine on BBC Radio 2 that he regretted not calling a by-election when he quit the Conservative Party in 2008. He stood as an independent in 2010 but was voted out.
Roger Lord, who was selected to stand for UKIP at next year's general election, has told BBC News he has "no intention" of stepping aside for the former Tory MP.
"It's an enormous discourtesy to anybody really just to announce that," he told BBC Essex.
He added: "Perhaps he's jumping ship to try and get in ahead of all the other Conservative MPs who are going to find themselves in the unemployment queue come next May."
Prominent local UKIP activists have also said there is no guarantee they will adopt Mr Carswell as their official candidate.
But UKIP's ruling national executive committee said it had voted to officially adopt Mr Carswell as the party's candidate in the by-election in Clacton.
"Roger Lord is not now, nor has he ever been the by-election candidate for Clacton," said UKIP's party secretary.
He said Mr Lord was "mistaken in his belief that he is the candidate and he can best serve the party's and the county's interests by standing behind the decision of the NEC".
Essex UKIP's website and The Clacton Gazette reported in July that Mr Lord had been adopted as the party's candidate.