O'Sullivan's departure follows the ugly departure of former KiwiBuild boss Stephen Barclay.
He resigned in January amid an employment investigation which revealed complaints from employees, contractors and stakeholders regarding his "leadership behaviour".
Barclay disputed this and said the complaints against him came "out of the blue".
Soon after his very public resignation, he announced he would be suing the Government over the way the issue was handled.
The KiwiBuild policy has been a thorn in the Government's side for much of its 18-month term.
Former Housing Minister Phil Twyford promised 1000 KiwiBuild homes would be completed by July, then 5000 by next year, then 12,000 a year each year until 2028.
The saga cost him the portfolio.
As of late June, just 119 KiwiBuild houses had been built.
Because of the policy's lacklustre performance, Prime Minister Jacinda Ardern announced in January there would be a KiwiBuild reset.
That reset has been pushed out a number of times.
Last month, Housing Minister Megan Woods said she would be presenting the KiwiBuild reset to Cabinet in late August.
"As I've said before, KiwiBuild hasn't worked the way we wanted it to and we will be making changes," she said at the time.
But she wouldn't say if the name "KiwiBuild" will survive the policy's reset.
Woods was given the portfolio after it was stripped from Phil Twyford in Ardern's July reshuffle.
Twyford does, however, remain on the ministerial housing team overseeing urban development.
National's housing spokeswoman Judith Collins said O'Sullivan's departure is yet another blow for KiwiBuild.
"The fact this has happened just before the so-called KiwiBuild reset is confirmation that Labour's flagship election policy is beyond saving."
She said KiwiBuild has been a failure since day one.
"All of its delivery targets have been either watered-down or abandoned. It has done virtually nothing to make housing more affordable across the board."
