Mr Banks said he had told the Prime Minister's office last week that he would offer his resignation if the matter was committed to trial.
"I have spoken to the Prime Minister this afternoon and he has accepted my resignation.
"I believe the decision in the Auckland District Court was wrong and I will be contesting the charge. However I do not want this to be a distraction from the Government's programme."
Mr Banks was the Associate Commerce Minister, Associate Education Minister, Regulatory Reform Minister and Small Business Minister.
Mr Banks said said he would continue to support the Government on confidence and supply votes, and would stay on as MP for Epsom and Act leader.
"My focus will now be on clearing my name and serving the people of Epsom," Mr Banks said.
Mr Banks' resignation means National has lost two of its support party ministers - United Future leader Peter Dunne resigned as minister after refusing to provide emails to an inquiry into the leak of a GCSB report.
Mr Key said he had accepted Mr Banks offer to resign as a minister.
"Mr Banks indicated to my Chief of Staff late last week that in the event the Judge ruled against him, he would tender his resignation as a Minister," Mr Key says.
"It is with regret that I announce today that I have accepted that resignation, and will be advising the Governor-General accordingly."
Mr Key said that even though the events occurred before Mr Banks entered Parliament in 2011, "this is totally the right call".
He said that if Mr Banks was found not guilty or made a successful appeal, he would be reinstated as a minister.
The Prime Minister said Mr Banks had been an able, competent and reliable minister.
Mr Banks had confirmed that he would continue to meet the terms of Act's confidence and supply agreement with the National Party, which meant key pieces of legislation would not be affected.
Mr Key said Mr Banks' small business and regulatory reform portfolios would be reallocated this week.
Banks had denied the charge of filing a false electoral return after Wellington man Graham McCready filed a private prosecution against him.
In the Auckland District Court this afternoon, Phil Gittos said sufficient evidence had been presented to send the matter to trial.
Mr McCready was not in court for the decision this afternoon.
McCready supporter Penny Bright told reporters he had not attended court today because he was not well and was not feeling confident after yesterday's hearing.
Banks' lawyer David Jones, QC, said he would plead not guilty.
Banks was remanded at large until December 17.
The decision came after a hearing yesterday during which internet mogul Kim Dotcom gave evidence that he was offended when told Banks wanted his $50,000 mayoral campaign donation to be anonymous.
Mr Dotcom said he was asked to split his donation into two anonymous $25,000 cheques.
"My reaction at first was I asked him why and I kind of felt offended,'' he told the court.
Mr Dotcom also confirmed Banks was flown in his private helicopter from Mechanics Bay in central Auckland to the Dotcom mansion in Coatesville in 2010.
Mr Dotcom's head of security Wayne Tempero also gave evidence of being present on the helicopter flight, and at a meeting in Coatesville when the two $25,000 cheques were discussed.
SkyCity boss Nigel Morrison told the court of handing Banks a cheque in an envelope at a meeting in 2010.
Mr Morrison confirmed details from his statement made to police in 2012, including that he made the same donations to Banks' and Len Brown's mayoral campaigns.
Banks' donation was handed over during a 10-minute meeting in Mr Morrison's office.
