The former policeman told Prime Minister Scott Morrison of his decision to resign on Sunday night, The Courier-Mail reported.
The member for Wide Bay in Queensland was among Barnaby Joyce supporters who were last week threatening to cross the floor and block coalition legislation after the failed leadership bid.
Senior government minister Mathias Cormann said Mr O’Brien would still be a member of the Liberal National Party and sit in the joint party room.
“He continues to support the government – that is what he has made clear to the prime minister,” Senator Cormann said on Monday.
Mr O’Brien will still give the government supply.