A military spokeswoman said Gal Hirsch, a brigadier-general in the Israeli army had submitted his resignation on Sunday.
According to Israeli media reports, Hirsch stepped down after a military investigation accused him of "improper functioning" after two soldiers were captured by Hezbollah fighters on July 12.
Hirsch had been head of the Galilee Brigades, which is responsible for patrolling Israel's northern border.
Israeli media reports said the army's inquiry had accused him of failing to follow safety procedures that may have prevented the capture of soldiers Ehud Goldwasser and Eldad Regev.
He had failed to drill troops about the possibility of being captured despite repeated warnings that Hezbollah planned to try to capture soldiers, Israel Radio said.
Israel's Maariv newspaper said Israeli Doron Almog, a reservist general, who has been carrying out an internal investigation of events that led to the war, had called Hirsch and recommended he resigned before he published his findings on the capture.
Hirsch is the second general to quit amid widespread public criticism of military failures during the 34-day war that ended with a UN-negotiated ceasefire in mid-August.
The newspaper quoted Hirsch as expressing anger over the conclusions, telling colleagues the report was unfair.
"To say I don't deserve to be a commander is quite absurd. I don't deserve this," Hirsch said.
In mid-September, Udi Adam, the general in charge of Israel's northern front, quit his command after the army was embarrassed by the nearly 4,000 rockets Hezbollah fired at Israel during the war, Israeli media reports said.
Israel's failure to secure the soldiers' release has hindered full implementation of a UN Security Council resolution that urged that they should be freed though stopped short of putting it as a condition for ending the war.