Lord John Sewel, 69, apologised for the "pain and embarrassment" he had caused after the Rupert Murdoch-owned Sun newspaper published pictures of him apparently wearing an orange bra as he chatted to two sex workers.
Scotland Yard has launched an investigation into his actions and raided his home at an exclusive block of flats near the Houses of Parliament on Monday night.
"I have today written to the clerk of the parliaments terminating my membership of the House of Lords," Sewel said in a statement. "I want to apologise for the pain and embarrassment I have caused."
On Monday, Prime Minister David Cameron questioned whether it would be "appropriate" for Sewel to continue approving laws amid the "very serious allegations" against him.
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