Liberal Democrat acting leader Vince Cable is boycotting the state visit to Britain of Saudi King Abdullah.
Mr Cable says he will not attend any of the planned ceremonial events - as would be normal for the leader of one of the main opposition parties.
Mr Cable told the BBC's Today programme that by any assessment of Saudi Arabia, "the human rights record is appalling".
He also cited the regime's arms deal with the British firm BAE and the row over alleged corruption surrounding it.
Mr Cable added: "I think it's quite wrong that as a country we should give the leader of Saudi Arabia this honour."
He said that although Britain has a "business-like" relationship with the country, Britain would not dream of extending the same invitation to other controversial leaders like Libya's Colonel Gadaffi..
He said he had also been critical of the Saudi regime's treatment of Britons.
The Saudi ambassador, Prince Mohammed bin Nawaf, said: "We respect all the political parties in the UK and we will continue to work together to pursue our common goals for the best interests of our two kingdoms."
Mr Cable's decision follows the controversy which erupted last year when Tony Blair halted a long-running Serious Fraud Office inquiry into the £40bn Al-Yamamah deal signed by Margaret Thatcher in the 1980s.
Mr Blair argued that Saudi security co-operation in the fight against international terrorism could be jeopardised if the investigation continued.
But critics claimed he was more concerned that Britain could lose out on a fresh £20bn contract to supply the Saudis with 72 Eurofighters - which the Ministry of Defence confirmed last month is going ahead.
In a letter to the Saudi ambassador in London, Mr Cable said: "In my opinion, it is quite wrong for the British government to have proposed a state visit at this time.
"Therefore, it would, I believe, be inappropriate for me to participate in a ceremonial state visit against this background."
A Foreign Office spokeswoman said: "Vince Cable's decision to decline the state banquet is a matter for him."
The decision to invite King Abdullah now reflected the "long-standing friendship" between the two nations, she added.
British and Saudi interests were "intertwined and inseparable" across a range of issues from counter-terrorism to ensuring stability in the Middle East.
Conservative shadow defence secretary Liam Fox warned that Mr Cable's move would be seen as "juvenile gesture politics" and risked insulting one of Britain's main allies in the Gulf.
Meanwhile, Labour leftwinger John McDonnell said that protesters would be staging a mass demo outside the Saudi Embassy on Wednesday.