Ukip deputy leader Mike Hookem has quit and will run for party leader.
He said he can no longer support the direction of party leader Gerard Batten and wants to offer “a real alternative” to his leadership that would “consolidate and rebuild our party”.
Mr Batten has already said he will stand down on June 2, launching a leadership contest.
In a letter sent to party officials at the close of polls in the European elections, Mr Hookem said: “I believe Ukip always has been and always should be a libertarian party that encourages and promotes common-sense policies with a broad electoral appeal.
“However, under Mr Batten’s leadership, and despite my appeals, Ukip has been derailed from this objective.
“Mr Batten’s policy direction and associations have given the mainstream media the ammunition to label our party ‘extreme’ and ‘far-right’, accusations I do not believe to be true.”
Mr Batten has been Ukip leader for 16 months and appointed former English Defence League leader Tommy Robinson as his political adviser in November 2018.
Mr Hookem, an MEP who stood for re-election this week, said Brexit had been a “golden opportunity for Ukip”, which was led by Nigel Farage before he stepped down in 2016.
He said Mr Batten had “squandered our natural advantage and seriously undermined 26 years of work in the process”.
Ukip languished in the polls ahead of the European elections, in stark contrast to the Brexit Party’s surge in support which saw Mr Farage’s new group overtake every other party.
Revealing his growing frustration, Mr Hookem said: “I have been desperate to act to stop the increasing isolation and marginalisation of our party in recent months.
“However unlike some who found alternative parties, I stayed loyal to the membership and delayed my resignation to minimise any potential electoral impact.
“I also wanted to make sure my resignation was unconditional on the outcome of yesterday’s European elections.”