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The Brazilian president's chief of staff Antonio Palocci has resigned over corruption allegations.

Mr Palocci, who ran a political consultancy while serving in the Brazilian Congress, has denied any wrongdoing.

A newspaper reported he had increased his personal wealth 20-fold over the past four years.

His resignation is a blow to President Dilma Rousseff who took office only six months ago.

The scandal broke three weeks ago when the Folha de Sao Paulo newspaper reported Mr Palocci's net worth was 20 times greater than it had been four years ago.

Trusted aide

Mr Palocci said the attorney general had confirmed "the legality and rectitude" of his conduct, but that the continuing "thrashing" the government was receiving over his high earnings could harm his effectiveness.

He said he resigned over concern the scandal could weaken President Rousseff.

Mr Palocci was seen as an advocate for fiscal restraint and a strong supporter of business.

It is the second time Mr Palocci has resigned from public office.

He stepped down from the post of finance minister in 2006 over another corruption scandal, but was cleared of any involvement.

Officials said Gleisi Hoffmann, a first-time senator for the governing Workers Party, would replace Mr Palocci.