David MacLeod, a former Canadian Forces member, said he resigned his candidacy in Central Nova as a matter of principle.
MacLeod said as a former member of the military who served in Cyprus, Bosnia and Kosovo, he couldn't support Bill C-51.
"The whole idea of serving in the military was to protect the rights and freedoms of Canadians," he said. "When they come up with a law like C-51, I couldn't live with it."
MacLeod said the bill is too sweeping in scope and he explained his reasons for quitting to Liberal Leader Justin Trudeau in a letter earlier this month.
The letter, provided to the Canadian Press by MacLeod, clearly states his opposition to the new law.
"The Act is a very disturbing piece of legislation that undermines Canadian democracy and the Charter of Rights and Freedoms," MacLeod wrote.
"My resignation is a principled, not political, decision."
Liberal party spokesman Olivier Duchesneau wouldn't comment on the specifics of MacLeod's complaint.
"We respect the decision and we thank him for serving our country," said Duchesneau.
The Liberals supported Bill C-51 in the third reading vote held May 6. MacLeod said he submitted his resignation on May 27 after waiting to see whether the party would change its position on the legislation.
The veterans advocate was nominated last September to take on Justice Minister Peter MacKay in the next federal election.
He said his resignation is not connected to MacKay's announcement on May 29 that he would not seek re-election.