Liberal MPs Tim Owen and Andrew Cornwell have stood down after revelations at the ICAC about "serious irregularities" in the funding for their 2011 election campaigns.
Mr Cornwell is the government's chief whip and the MP for Charlestown. Tim Owen is the member for Newcastle.
They have stood down from the parliamentary Liberal Party and relinquished their parliamentary positions.
Premier Mike Baird said he made "no judgment" regarding the outcome of Operation Spicer, the Independent Commission Against Corruption inquiry into Liberal Party fund-raising.
"However, it will take time for the allegations to be resolved, and I am not prepared to allow this to become a distraction for the party or the government," he said.
In May, Mr Owen announced he would not contest the 2015 election because it "appears highly likely" that prohibited donors "did contribute in some way to my election campaign" without his knowledge.
The commission on Wednesday heard Mr Cornwell had given evidence that property developer and Newcastle mayor Jeff McCloy called him to a meeting in his Bentley before the last election and handed over cash totalling $10,000. The money was allegedly later given to the Liberal Party, however Mr McCloy denies the claims.
Counsel assisting the inquiry Geoffrey Watson, SC, said Mr Cornwell has been "helpful" to the commission there was "no evidence" he favoured the interests of Mr McCloy or developer Hilton Grugeon, who are accused of making illegal donations.