Mofaz's switch means that seven cabinet ministers have followed Sharon in jumping ship from Likud to Kadima.
Mofaz said on Sunday that he quit the Likud because "extremists" have hijacked the party.
"The Likud party ... is growing away from me, and to my sorrow, is moving in the direction of what we call the rightwing extremists of the political map," he told a news conference.
His defection leaves former prime minister Benjamin Netanyahu and current Foreign Minister Silvan Shalom as the only realistic contenders for the leadership of the rightwing Likud.
The radio report on Sunday said Sharon had managed to attract Mofaz by offering to keep him as defence minister if he is re-elected in March, as polls predict.
Mofaz had been seen as one of Sharon's top allies, overseeing the prime minister's pullout of Israeli troops and settlers from the Gaza Strip this year.
Shalom attributed Mofaz's decision to his realisation that he had no chance of being elected leader of Likud.
"I've just heard about this resignation with great surprise. I had no idea," Shalom told army radio.
Drop in popularity
"We saw a huge drop in Shaul Mofaz's popularity in the opinion polls and this fall appears to have brought about this decision."
Shalom recognised that the decision would exacerbate the crisis within the Likud.
"We are entering a difficult struggle, a head-to-head struggle but it is a struggle for the good of the party.
"The Likud is going through a crisis and one which cannot be swept under the carpet. So we have to consider very carefully who can pull Likud out of this crisis."
Sharon decided to split from Likud and form Kadima late last month, fed up by confrontations with members of his party who refused to forgive him for withdrawing from the Gaza and parts of the West Bank occupied by Israel since 1967.
"The members of Likud have to decide if they want a small and marginal movement or a strong party"
Israel's defence minister
Finance Minister Ehud Olmert and Justice Minister Tzipi Livni were among the other high-profile Likud defectors, while the centre-left Labour party's former leader, Shimon Peres, has also endorsed Sharon.
Until Sharon split and formed Kadima, Likud could boast 40 out of the 120 members of the Israeli parliament, the Knesset.
But a poll published in Friday's Yediot Aharonot daily predicted that its number of seats could drop to 13 after the country goes to the polls on 28 March.
Likud was founded in 1973 with the merger of four fringe rightwing parties.
Its first leader, Menachem Begin, became prime minister in 1977, a position held by a Likud leader for all but seven of the next 28 years until Sharon's dramatic split.
In an interview on Thursday, Mofaz had warned that Likud risked being marginalised if its members elected Netanyahu, the favourite to win the 19 December leadership contest.
"The members of Likud have to decide if they want a small and marginal movement or a strong party... If Netanyahu is the leader of the Likud, it will be a small and marginal movement."