Alan Duncan has quit the Conservative leadership race saying its "moralising wing" could condemn it to oblivion.
Mr Duncan is his party's first openly gay MP
Mr Duncan, the only openly gay Tory MP, told the Times: "Our Achilles heel has been our social attitude. We should... allow people to live as they choose...
"If the 'Tory Taleban' can't get that they'll condemn us all to oblivion."
Out-going Tory leader Michael Howard said the remarks surprised him. About eight MPs are now thought to be left as contenders to replace Mr Howard.
Mr Duncan, the shadow transport secretary, had said he would drop out if he did not pick up backing among MPs.
Announcing his withdrawal to The Times, Mr Duncan said: "Censorious judgmentalism from the moralising wing, which treats half our countrymen as enemies, must be rooted out.
"We should turn our indignation at poor education into a fundamental review that asks what we should teach and how we should teach it.
"Why are we talking so little of foreign affairs and social cohesion at a time when it is shaming for us not to have a single Muslim MP?"
But Mr Howard told BBC Radio 4's Today programme: "I am surprised that Alan has said that and I'm surprised he believes it because I don't believe it to be true.
"I don't think we are censorious about people's lifestyles - I think we've moved on and I think that we accept that, so Alan's remarks surprise me."
Mr Duncan has so far refused to say who he will back in the contest to succeed party leader Michael Howard, who is due to step down by Christmas.
Meanwhile shadow cabinet colleague Theresa May gave the strongest indication yet she would launch a leadership bid.
Ms May, the party's family and culture spokesman, who has previously declined to rule herself out, told BBC Radio 4's Westminster Hour: "I will be thinking about whether to stand."
Other likely candidates for a leadership contest expected in October include David Davis, Sir Malcolm Rifkind, Liam Fox, David Cameron, Andrew Lansley and Kenneth Clarke.