Foreign Affairs Permanent Secretary Thuita Mwangi has stepped aside to allow investigations into the Sh1.1bn Tokyo embassy land saga.
Mr Mwangi communicated his decision to President Kibaki Wednesday, who in turn accepted.
"His Excellency the President, Hon Mwai Kibaki, has today accepted the request by Mr. Thuita Mwangi, to step aside as Permanent Secretary, Ministry of Foreign Affairs, to allow for investigations on the report tabled in Parliament by the Committee on Defence and Foreign Relations regarding purchase of and/or Disposal of Government Properties at Foreign Missions," said a statement from the President's office.
In a statement, the PS said he was stepping aside to "allow the competent Government Organs to fully and without impediment investigate all matters of concern raised in the Report of the Departmental Committee on Defence and Foreign Relations on construction, purchase and disposal of properties abroad".
"I have consciously taken this decision as an expression of my confidence that at the conclusion of the on-going investigations by the Kenya Anti Corruption Commission, the appropriateness of my engagement with all aspects of the operations pertaining to this matter will undoubtedly be established," he said.
"I step aside purely as a matter of personal dignity and professional integrity – indeed, the very same dignity and integrity I have upheld in the performance of my duties for more than twenty-two years of public service at various levels in the Government."
Mr Mwangi's move represents a change of heart after he vowed two weeks ago not to resign over the controversial deal.
At the time, he said the report was out to "achieve an ulterior motive" and indicated he would stay put.
The PS said an earlier investigation by auditors from Treasury had concluded that the government got value for its money in the deal.
The House report had recommended that Mr Mwangi and Foreign Affairs minister Moses Wetang'ula step aside to pave way for investigations into the irregular deal.
In a dramatic twist, Mr Wetang'ula has called a news conference at 3 p.m. where he is expected to face questions over his fate.
On Wednesday, the minister denied responsibility for the scandal in Parliament and instead shifted blame to civil servants in his Ministry.
"The long and short of it is this; ministers don’t deal with transactions. We deal with what we are given; ministers only deal with policies,” Mr Wetang’ula said.
“The minister does not procure, the minister does not sign cheques, the minister does not sign vouchers, the minister does not chair committees, the minister does not deal with budgets…” he said during his presentation to the House.
MPs will vote on an amendment to the report seeking to have Mr Wetang'ula's name expunged on Wednesday afternoon.
The amendment was moved by Kimilili MP Eseli Simiyu and supported by Public Service minister Dalmas Otieno.
The proposal was received with hostility by backbenchers with MPs Martha Karua, Isaac Ruto and Farah Maalim leading the opposition to the amendment.
The report reveals that Foreign Affairs Ministry officials ignored recommendations from civil servants and independent valuers to saddle the public with huge bills that could have been avoided.
The Kenya Anti Corruption Commission (Kacc) is now also investigating embassies in Islamabad (Pakistan), Brussels (Belgium), Lagos (Nigeria) and Cairo in Egypt.
In Lagos, the ministry sold two plots said to have been in “one of the choicest areas” of the former political capital of West Africa’s largest country.
The plots were next to the homes of former Nigerian president Ibrahim Babangida, the residence of the British High Commissioner and the residence of the governor of Lagos, among others.
A government team had recommended that Kenya retains the properties but the ministry sold them, claiming they wanted to build a new embassy in Abuja. In the end no embassy was built in Abuja; the government rents premises in Lagos for the embassy.
Over Sh80 million from the sale is not satisfactorily accounted for and a lawyer who acted for the ministry in the transaction is still demanding millions of shillings as legal fees.
In Brussels, the ministry lost an estimated Sh84 million by asking the owner of a building, more than 90 years old, to include the cost of valueless furniture in the price.