The MP for Sleaford and North Hykeham since 2010, he won the seat with a majority of more than 20,000 last year.
The MP backed EU exit but said he could not represent constituents due to disagreements with ministers about their approach since June`s Leave vote.
It is not clear whether he will stand in a forthcoming by-election.
The politician and barrister is the second Tory MP to stand down in as many weeks - Zac Goldsmith last week forced a by-election over Heathrow expansion.
Mr Phillips has been critical of the government`s approach to Brexit since June`s Leave vote, accusing Theresa May of trying to "ignore the views" of Parliament and avoiding scrutiny of the government`s negotiating position.
His resignation comes a day after the High Court said Parliament must be given a vote before the UK triggers official negotiations with the EU over its exit.
In a statement, he said: "It has become clear to me over the last few months that my growing and very significant policy differences with the current government mean that I am unable properly to represent the people who elected me.
"This decision has been a difficult one and I hope that everyone will respect the fact that I have tried to act in the best interests of all of my constituents."
In last year`s election, Mr Phillips won a majority of 24,115, with 56% of the vote. Labour finished second in the eurosceptic constituency, closely followed by UKIP.
UK Conservative lawmaker Phillips resigns amid political differences with gov’t
04 November 2016
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Tory Stephen Phillips has quit as a Lincolnshire MP over "irreconcilable policy differences" with the government since the Brexit vote.
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