Alice Mahon, MP for Halifax between 1987 and 2005, said she also felt "absolutely scandalised" by the Damian McBride affair.
Mahon, 71, a left-winger who was a vocal critic of Tony Blair and the Iraq War, has now written to Halifax Constituency Labour Party tendering her resignation.
She had been a member for more than half a century.
In her letter, she said: "This has been a difficult decision to take as I feel I was almost born into the Labour Party.
"However, I can no longer be a member of a party that at the leadership level has betrayed many of the values and principles that inspired me as a teenager to join."
Ms Mahon, who regularly rebelled against New Labour policies during her time as an MP, said she was "shocked and absolutely scandalised" by the Government's smear scandal.
She said that recent developments had finally convinced her to quit the party.
Speaking to Sky News, she said: "I've reached the end of the road with the Labour Party. I've lost faith in the Government and the direction they are taking us in.
"I did hope, as did many party members, that we would get a change of direction if we got a new leadership. Unfortunately I could not have been more wrong."
Press Assoc.
"The Nineteenth century saw a great Springtime of Nations as the revolutions of 1848 saw new countries created the length and breadth of Europe. In our world today we are now seeing our own Spring Awakening with people and cultures that have long been dormant and subdued asserting their right to exist, their right to dream." Adam Price MP
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