Khadse, a senior BJP leader and considered "number two" in the Cabinet, had been facing heat over a host of allegations including irregularities in a land deal in Pune and calls allegedly received from mob boss Dawood Ibrahim's residence in Karachi on his mobile phone.
He vowed to quit politics if any concrete charges were proved againt him.
Earlier, Chief Minister Devendra Fadnavis had briefed Prime Minister Narendra Modi and BJP chief Amit Shah over the issue.
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Khadse is the first minister in Narendra Modi government to resign over corruption charges.
On Friday, when he was asked about his whereabouts -- which has given rise to speculation that he is sulking -- Khadse said, "I am in the country and Maharashtra. I am at present working on proposals to deal with drought situation if the monsoon is delayed."
He maintained he was ready to face punishment if found guilty of wrongdoing.
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"But what is happening at present is only baseless allegations without any proof. Astronomical figures are being spoken of in the transactions involving me. Time will tell who is behind this making me a target," he said, adding it had taken him four decades of hard work to build a political career which his detractors were seeking to destroy.
He is in a spot over the purchase of a three-acreMaharashtra Industrial Development Corp land in Pune allegedly at a low price of around Rs 3.75 crore from its original owner in the name of his wife and son-in-law. The market value of the land is reportedly Rs 40 crore.