The scandal weakened Brazil's currency on fears of further instability less than two weeks after President Dilma Rousseff was suspended to stand trial in the Senate for allegedly breaking fiscal laws, leaving former Vice President Temer to lead the country.
"Starting from tomorrow, I will step aside," Juca, appointed by Temer after Rousseff's suspension, told reporters in Brasilia. He denied any wrongdoing and insisted that his recorded comments had been distorted and taken out of context.
In the recording, made before Rousseff was put on trial and published by newspaper Folha de S. Paulo on Monday, Juca told a friend he agreed on the need for a "national pact" to limit the graft probe rattling the political establishment.
Asked for help by his ally, ex-senator Sergio Machado under investigation in the probe, Juca replied: "The government has to be changed in order to stop this bleeding," Folha reported, adding that the conversations were taped "secretly."
Juca said the conversation happened either at his home or at his office but it was not clear how the hour-long recording was made. Local media reported it may be connected with Machado who has been negotiating a plea bargain deal with prosecutors. Machado was not immediately available for comment.
Juca and other ministers in Temer's new government are under investigation for their alleged roles in the massive bribery scheme stemming from state-run oil company Petrobras.
At a press conference earlier on Monday, Juca insisted that he would never interfere in the investigation and his comments were not incriminating in any way. He said the "bleeding" he was referring to was Brazil's free-falling economy and the Rousseff government's recent paralysis.
By the end of the day, however, the scandal had reached a fever pitch in the capital Brasilia, and Juca announced his plans to take a leave of absence from the ministry until public prosecutors make public statements exonerating him.
Brazil's benchmark Bovespa stock index was knocked lower by the news, falling 0.8 percent on Monday. The local currency lost 1.8 percent against the U.S. dollar.
Temer said in a statement that Juca would support the government from the Senate to ensure that the budget and other reforms were passed.
A trained economist with over 20 years in the Senate, Juca was a key member of Temer's new economic team that is racing to approve a series of economic measures in Congress aimed at rescuing investor confidence in the slumping Brazilian economy.
New Finance Minister Henrique Meirelles will announce on Tuesday some of those measures to include limits to public spending to close a widening fiscal gap that cost Brazil its coveted investment-grade rating.