National MP Simon Bridges has been demoted and relieved of his portfolio responsibilities.
Leader Judith Collins says it follows an "allegation of serious misconduct" relating to his interaction with a caucus colleague.
Newshub understands the MP involved is Jacqui Dean.
"The case relates to comments made by Mr Bridges to a female caucus colleague at a function a number of years ago," Collins said in a statement on Wednesday night.
"Having been made aware of the seriousness of the complaint for the first time and the ongoing distress this has caused the complainant, I was left with no option but to immediately demote Simon Bridges and relieve him of his portfolio responsibilities."
Collins adds the decision was not made lightly and was done with the unanimous support of the board of the National Party.
"The seriousness of the situation demands a swift and decisive response," she says.
"Under my leadership, the National Party will not tolerate harassment and intimidation of any person.
"Members of Parliament and staff should be able to conduct their duties at all times without feeling unsafe or intimidated, and all deserve to be treated with absolute respect by their colleagues in all situations."
Collins will hold a press conference on Thursday with deputy leader Dr Shane Reti and Dean.
Her actions come just days after Bridges repeatedly refused to rule out another National leadership bid - instead only telling Newshub it's "not my intention" to make a tilt.
"I've made clear what I think," Bridges said, when asked if there is any chance of a coup this year.
His answers followed weeks of speculation Collins' leadership has been under threat from Bridges due to her poor polling.
According to the NZ Herald, Bridges was asked twice whether Collins would still be leader by the time 2022 rolled around. He is reported as refusing to give a definitive answer.
"Judith Collins is the leader of the National Party and I support her as leader," he said.