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Boris Johnson has apologised for appointing Chris Pincher to a government role after being told about a misconduct complaint against the MP.
The PM admitted he had been told about the complaint in 2019 - but had made a "bad mistake" by not acting on it.
Chancellor Rishi Sunak and Health Secretary Sajid Javid resigned minutes after the PM spoke.
Mr Pincher was suspended as a Tory MP last week over allegations of sexual misconduct.
The Tamworth MP has said he was seeking professional medical support and has denied previous allegations of misconduct. He has been contacted by the BBC for comment about the 2019 complaint but is yet to respond.
The prime minister's handling of the row over Mr Pincher's appointment and what he knew about allegations against him has been criticised by opposition parties and Tory MPs.
In his resignation letter, Mr Sunak said the "public rightly expect government to be conducted properly, competently and seriously".
"I recognise this may be my last ministerial job, but I believe these standards are worth fighting for and that is why I am resigning," Mr Sunak wrote.
In his letter, Mr Javid said he could "no longer continue in good conscience" under the prime minister, who had lost his confidence.
Speaking to BBC political editor Chris Mason, Mr Johnson said he was "fed up with people saying things on my behalf" and wanted to set the record straight.
He said he was "aware back in 2019, of a specific allegation against Pincher that was resolved".
But in hindsight, Mr Johnson said, appointing Mr Pincher to the role of deputy chief chip in February this year "was the wrong thing to do".
"There is no place for anyone in this government who abuses power," Mr Johnson said.
He added: "I bitterly regret the decision not to... intervene."
He also did not deny jokingly referring to the MP as "Pincher by name Pincher by nature".
No 10 said the PM was told about the 2019 complaint on Tuesday morning after its account was disputed by the former top civil servant at the Foreign Office, Simon McDonald.
In a strongly worded letter, Lord McDonald insisted the prime minister "was briefed in person" about an inquiry into the complaint against Mr Pincher in 2019.
Government minister Michael Ellis then told MPs the prime minister "did not immediately recall the conversation in late 2019 about this incident".
"As soon as he was reminded, the No 10 press office corrected their public lines," Mr Ellis said.