Alexander was appointed by Mayor of London Boris Johnson to monitor the London Organising Committee of the Olympic and Paralympic Games (LOCOG).

Alexander, head of trade and corporates at the charity Action Aid told the Commission for a Sustainable London 2012 that she could no longer remain in the unpaid post given LOCOG's refusal to end the association.

She was one of 13 commissioners.

"I don't want to be party to a defence of Dow Chemicals, the company responsible for one of the worst corporate human rights violations in my generation. It is appalling that 27 years on, the site has still not been cleaned up and thousands upon thousands of people are still suffering.

"I believe people should be free to enjoy London 2012 without this toxic legacy on their conscience," she said.

Welcoming Alexander's resignation, Amnesty International said the London 2012 Olympic organisers must admit their mistake in awarding the lucrative seven million pound contract to the Dow Chemical Company.

Dow Chemical owns US-based Union Carbide Corporation (UCC), the company that held a majority share in the Indian subsidiary that owned and operated the UCC plant responsible for the 1984 gas leak disaster, which killed thousands of people.

Dow is due to provide a plastic wrap that will encircle the London 2012 Olympic Stadium during the Games.

"This high profile resignation means the London 2012 organisers can no longer ignore human rights concerns about Dow, a company that has refused to meet its responsibilities in relation to the victims of Bhopal," said Seema Joshi of Amnesty International.

"Lord Sebastian Coe must publicly state that human rights concerns were never considered when awarding a contract to Dow and that LOCOG made a mistake."

Reacting to the resignation, Barry Gardiner, MP, Chair of Labour Friends of India said "it is clear that LOCOG had lined Dow Chemical's up for this partnership deal, and the whole procurement process was a sham."

Meredith has had the courage to stand up and say what everybody should have known all along: that Dow Chemicals were not a suitable partner for a Games that has prided itself on being the most sustainable ever, he said.

Lord Coe told the Select Committee that a thorough investigation had been carried out into Dow's suitability and that "no current media, political or NGO commentary that would give cause for concern" was found.

"This claim is unbelievable, given the number of incidents of recent business malpractice by Dow that have been widely reported in the press. As Meredith said, even a 12 year old could have found stuff," he said.

"We now find that 12 out of 13 commissioners for sustainability had no involvement or knowledge of Dow's involvement with the games, until the sustainability committee's Chair wrote to Tessa Jowell about it. It's not Meredith Alexander that should be resigning, but Shaun McCarthy."

Gardiner said he would now be calling for an immediate Select Committee enquiry into this whole affair.

Alexander was appointed by the London Mayor Boris Johnson to serve on the Commission for a Sustainable London 2012 (CSL) – the ethics body that monitors the processes of all the bodies responsible for delivering the 2012 Games.

In recent weeks, CSL publicly defended LOCOG's decision to appoint Dow to sponsor the 900 million wrap.

That decision, and the Olympic bodies' subsequent defence of Dow, enraged Alexander and human rights groups including Amnesty International.

Campaigners have called on London 2012 organisers to drop the 7 million pound sponsorship deal, claiming the company has outstanding liabilities relating to the 1984 Bhopal disaster.