The decision by Ghaida Rinawie Zoabi of the dovish Meretz party leaves the coalition headed by right-wing Prime Minister Naftali Bennett with just 59 out of 120 seats in Israel's parliament, the Knesset.
The development does not, however, necessarily indicate that the coalition -- an alliance of parties ranging from the Jewish right and Israeli doves to an Arab Muslim party -- is set to collapse.
Approving a motion to dissolve parliament and call new elections requires 61 votes.
Several opposition lawmakers, including Zoabi and members of the Arab Joint List, are bitterly opposed to the current opposition leader, former premier Benjamin Netanyahu.
Netanyahu -- in office from 1996 to 1999, and again from 2009 until June 2021 -- has been outspoken about his desire to topple the Bennett government, force new polls and return to power.
But the prospects of 61 opposition lawmakers supporting new elections that could return Netanyahu to power remain far from certain.
In a letter announcing her decision to leave the coalition, Zoabi said: "Again and again the heads of the coalition have taken hawkish, rigid and right-wing stances regarding basic issues of utmost importance for Arab society."
She referred to unrest at the Jerusalem's flashpoint Al-Aqsa mosque compound, tensions in the Sheikh Jarrah neighbour of Israeli-annexed east Jerusalem, and "the funeral of Palestinian journalist Shireen Abu Akleh."
Abu Akleh, a veteran reporter, was shot dead during an Israeli army raid in the West Bank last week.
Palestinians and the TV network said Israeli troops killed her, while Israel said she may have been killed by Palestinian gunfire or a stray shot from an Israeli sniper.
In a raid that has sparked international outrage, baton-wielding Israeli police beat several pallbearers as they carried the journalist's coffin out of a hospital before her burial.
Police said they were acting against rioters and a need to suppress "nationalistic", or Palestinian, chants.
"I cannot continue supporting the existence of a coalition that harasses my community in this disgraceful manner," Zoabi wrote.
A member of Israel's 20 percent Arab minority, Zoabi had been nominated to serve as Israel's consul-general in Shanghai, taking up her post over the summer.
It was not immediately clear how her departure from the coalition could impact that nomination, but if she takes a diplomatic role she would be compelled to leave the Knesset, with Meretz naming her replacement.