He told jurors that he took the decision to quit because he "could not do the job" he was "employed to do".
His resignation from a senior position was the second in the space of four years. In 2007 he quit as editor of the News of the World because he felt it was the right thing to do following the arrest and subsequent sentencing of the paper's royal editor Clive Goodman for phone-hacking-related offences.
He said he could not imagine "sitting at my desk writing a leader criticising a public figure or a politician when the paper itself had failed under my editorship".
Coulson told jurors that he had been hired by the Tory party after a meeting with George Osborne seven months later.
"Subsequent to that, I had a meeting with David Cameron and after the May local elections that turned into a job offer."
After the general election in May 2010, Coulson went to work in Downing Street but within months he left.
"There had been a long period of press coverage of issues relating to this trial and over a period of time I once again found myself in the position where I could not do the job I was employed to do so I felt I should resign," Coulson said.
He told jurors he decided to resign from News of the World over Christmas 2005 after discussions with his wife Eloise. He told a News International executive two weeks before Goodman was sentenced at the end of January 2007.
He recalled that Rupert Murdoch called him just as he was driving out of the production plant in Wapping.
"He wished me well and I reminded him what he had said to me when I told him about the arrest of Clive Goodman and that had been part of my thinking," Coulson said.
Coulson and Goodman deny that they conspired to hack phones.
During cross-examination by Goodman's counsel, Coulson denied he was a bully but admitted that the culture of newspapers in the 1980s and 1990s was "temperamentally more aggressive" than it was now.
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