In a letter to Mr Bennett, Ghaida Rinawie Zoabi from the Meretz party said she was leaving Israel's coalition because it too often adopted nationalist positions on issues of importance to the Palestinian citizens of Israel who make up her constituents.
The announcement further weakens Mr Bennett’s hold on Israel’s 120-seat parliament, reducing the coalition to 59 seats. Two other legislators from his own party have already quit.
“Enough. I cannot continue to support a coalition that in such a shameful way hounds the society from which I came,” she said.
She cited Israel’s conduct at Jerusalem’s Al Aqsa Mosque, which in recent weeks has been the site of clashes between police and protesters, and the beating by police of pallbearers at the funeral of Al Jazeera journalist Shireen Abu Akleh, shot while covering confrontations between Israeli forces and Palestinians.
Ms Zoabi’s departure further raises the possibility of new parliamentary elections, less than a year after the government took office.
Mr Bennett’s government remains in power, but it is now even more hamstrung in parliament and will probably struggle to function.
Mr Bennett, who leads a small, hard-line nationalist party, heads a coalition of eight ideologically diverse factions, from those that support Palestinian statehood to nationalist parties and, for the first time in Israeli history, Israeli Arabs in Mansour Abbas's United Arab List.
They came together last June with little in common other than their drive to oust former leader Benjamin Netanyahu, who now heads the opposition.
As part of their union, the parties agreed to set aside divisive issues, such as Palestinian statehood, and focus instead on topics such as the coronavirus pandemic and the economy.
Despite the differences among the coalition, it has managed to pass a budget, navigate the pandemic and strengthen relations with both the US Biden administration and Israel’s Arab allies.
But a wave of Israeli-Palestinian tensions, set off by several deadly Palestinian attacks against Israel and Israeli arrest raids in the occupied West Bank, and fuelled by repeated clashes between Israeli police and Palestinian protesters at Al Aqsa, has shaken the coalition’s stability.