Darwin-based Luke Gosling, who holds the federal seat of Solomon, is facing fresh accusations of breaching his bail conditions.
He was originally charged in July with the assault of Northern Territory Administrator David Connolly, the jurisdiction's equivalent to a state governor.
In a statement on Wednesday, Gosling announced his decision to step down until the matters have been dealt with in court.
"Due to the ongoing media attention and the distraction this is causing to the business of government, I have decided to temporarily stand aside as Special Envoy for Defence, Veterans' Affairs and Northern Australia," the post on social media reads.
"I am more committed than ever to my role serving the people of Darwin and Palmerston."
Gosling vowed to "rigorously" defend himself against the charges in court and strongly denies the allegations.
Police allege the 54-year-old breached his bail conditions on August 14.
Gosling was charged on Tuesday with one count of breach of bail and is due to appear in Darwin Local Court on September 30.
Earlier, Opposition Leader Angus Taylor said the prime minister faced an even "stronger test" of his leadership since charges were first laid.
"(Anthony Albanese) must act. It's completely unacceptable for a second charge to be placed on Luke Gosling, he should be stood down," Â he told ABC News Breakfast.
"Presumption of innocence is important in our system, but he should be stood down whilst these proceedings continue."
The assault is alleged to have occurred at the NT Thailand Grand Festival in Darwin on July 18, with Gosling posting photos from the event on social media that day.
One Nation MP Barnaby Joyce said Mr Gosling needed to step down.
"You've gotta get punted, mate. I don't know, let's see what Mr Albanese does," he told News24.
NT Chief Minister Lia Finocchiaro said the matter was for Mr Albanese to deal with.
"Ultimately, if all of these allegations are true, it clearly doesn't meet the expectation of our community," she told ABC Radio.
"There's an expectation of behaviour of elected members of parliament, no matter what level you sit," she said
Gosling's lawyer, Marty Aust SC, has previously criticised police for arresting the politician at his home instead of issuing him a summons or notice to appear.
As part of his bail conditions, Gosling is banned from going within 50 metres of the NT's Government House building and must give the administrator's office 48 hours' notice before attending any event where the two men would be present.
If they are at an event together, the Labor politician must not be within 15 metres of Mr Connolly.
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