Denis Coderre has resigned as Liberal Leader Michael Ignatieff's Quebec lieutenant and defence critic -- handing the Liberals a stunning internal blow from the man who was supposed to play a vital role in their next election campaign.

Coderre resigned over a disagreement about the political comeback of someone who is seen a potential rival of the Quebec MP.

Coderre told a Montreal news conference on Monday that he will remain a Member of Parliament, where he represents the riding of Bourassa.

"It is a tough decision, a very emotional one that I have to make today," Coderre said. "But I took four days on my own ... and I thought that I don't have any more the moral authority to remain as the Quebec lieutenant."

Jean Lapierre, a former Quebec lieutenant under Paul Martin, told CTV News that a backlash is brewing under Ignatieff.

"People feel Mr. Ignatieff doesn't have any loyalty. They feel he betrayed Mr. Coderre," he said Monday.

Coderre caused a stir about his intentions early Monday when he issued a press release to announce the news conference that for the first in months did not include the title, "Michael Ignatieff's Quebec lieutenant."

During the news conference, Coderre denied that his decision to step down was about the "settling of accounts."

Coderre said he still has "confidence" in Ignatieff, but he suggested the Liberal leader make changes to his inner circle of advisers.

"Much more fundamental questions are raised by these events: Who should the leader of the Liberal Party of Canada listen to on decisions that strictly affect Quebec?" he said.

"Should he follow his Quebec lieutenant while working closely with a credible team? Or to his Toronto advisers who know nothing about the social and political realities of Quebec?"

Ignatieff was quick to downplay the resignation and dismissed the idea of a Toronto-run party.

A serious rift?

The rift between Ignatieff and Coderre broke open last week over who should be nominated as the Liberal candidate in the Montreal riding of Outremont.

Former justice minister Martin Cauchon, who left politics in 2004, has signalled his intention to return to Parliament Hill and reclaim the riding he held for 11 years.

However, Ignatieff announced last Monday that he would appoint businesswoman Nathalie Le Prohon, who was selected by Coderre, as the Liberal candidate in Outremont,

The decision seemed to end Cauchon's hopes of a political comeback, but Coderre announced later in the week that another riding would be offered to Cauchon.

Meanwhile, a number of Liberal MPs, including Bob Rae, rallied around Cauchon in his bid for Outremont.

By the end of the week, Ignatieff had reversed his own decision about Outremont to allow for an open nomination contest in the riding.

Coderre was widely criticized for trying to block Cauchon's move to run in his old riding, a decision Coderre defended as an attempt to invigorate the party.

Coderre, who was clearly angry at being overruled on Outremont, said he did not want to air the Liberal Party's dirty laundry in public, but criticized Ignatieff for trying to run the politics of Quebec from Ontario.

"The lesson drawn from these events is the following: If you want to carry the day on a Quebec issue, all you have to do is perform an end-run around the Quebec authorities of the party, and go to the inner circle from Toronto."

CTV News' Ottawa Bureau Chief Robert Fife reported earlier Monday that Ignatieff's office was completely unaware of Coderre's plans and said the Liberal leader had not been in contact with his lieutenant over the weekend. However, Ignatieff had left three voice mails on Coderre's cellphone and two emails this morning, all of which had gone unanswered, Fife said.

According to Fife, Cauchon would likely emerge as a rival to Coderre to replace Ignatieff in a future Liberal leadership contest.

But an immediate concern, Fife said, is that Coderre's resignation will cause turmoil "and perhaps open warfare in the Liberal Party."

"In the long-term here, nobody in this country who wants to lead a party can win if he can't control his own party," Fife told News Channel. "Voters don't elect people who can't run their own party. More important than that, this is happening in Quebec, where the Liberal Party needs to win seats if they are going to have any chance of beating the Conservatives and forming a minority government."

It is unclear who Ignatieff may choose to replace Coderre as his Quebec lieutenant. Whoever takes over, Coderre said, will inherit a Quebec wing in good shape heading into a possible election, with 68 strong Liberal candidates already selected out of 75 Quebec ridings.

Meanwhile, winning back Outremont will be key for the Liberals. The riding was a Liberal stronghold until New Democrat Thomas Mulcair grabbed the seat in a 2007 by-election upset victory.

While Cauchon appears to be the front-runner to secure the nomination, Lapierre said other candidates will throw their hats into the ring.

Party activist Dr. Comlan Amouzou, who has resided in Outremont since immigrating to Quebec from Togo in 1995, has declared his intention to seek the nomination, Lapierre told CTV Montreal.

Amouzou has already established a website declaring his candidacy.

And Le Prohon, who had agreed to switch ridings and run in Jeanne-Le Ber, may reconsider running in Outremont, Lapierre said.

"So it's quite a mess that Mr. Ignatieff now has on his desk," Lapierre said.