A statement by the spokesman Dennis Onyango said the PM had “endorsed Hon. Kosgey’s request, after consultation with President Mwai Kibaki.”
Mr Kosgey had offered to step aside and said he was ready to face corruption charges.
He appeared in court later Tuesday and denied 12 counts of abuse of office brought against him.
He was released on bail and the case set for mention on March 2.
The move by the Industrialisation minister came only a day after the Attorney-General Amos Wako approved his arrest and prosecution over the importation of over-age cars.
Mr Kosgey told journalists that he had written to President Kibaki and Prime Minister Raila Odinga offering to step aside from his ministerial duties until the car imports matter is dealt with.
He thereafter surrendered to the Kenya Anti-Corruption Commission (Kacc).
Mr Kosgey is also the national chairman of the PM’s political party, the Orange Democratic Movement (ODM). He was also last month named as one of six top Kenyans named by the prosecutor of the International Criminal Court Louis Moreno-Ocampo as a key suspect in the post election violence that rocked the country after the disputed 2007 presidential election.
He becomes the third member of the Cabinet currently out of office on corruption allegations. The others are Moses Wetangula who had the Foreign Affairs portfolio and William Ruto who headed Higher Education.
Mr Wetangula is under investigations over the sale of Kenya’s embassy building in Tokyo, while Mr Ruto is facing court charges over the sale of public land.
This looks to me to be a sign of progress toward the rule of law in Kenya. While active resistance continues regarding addressing the post election violence, in this situation the KACC initiated a request to prosecute a high-ranking government official of important standing politically and was given the green light by the Attorney General who would normally be expected to sit on something of this nature. Like the other corruption cases, starting and finishing are two different things, but it does appear that the present environment has changed enough that the KACC has some actual clout as well as the will to bring cases forward.