The head of Microsoft’s Israeli subsidiary will step down in the wake of an inquiry that has scrutinised its business dealings with the Israeli military.

Microsoft ordered the inquiry last year in response to a Guardian investigation revealing the military had used the company’s technology to operate a powerful surveillance system that collected Palestinian civilian phone calls on a mass scale.

The joint investigation with the Israeli-Palestinian publication +972 Magazine and the Hebrew-language outlet Local Call found the military’s elite spy agency, Unit 8200, had used Microsoft’s Azure cloud platform to store a vast trove of intercepted calls from Gaza and the West Bank.

The inquiry commissioned by Microsoft is understood to have recently concluded. Its findings are unclear; however, sources familiar with the situation said they prompted an announcement last week that Microsoft Israel’s general manager, Alon Haimovich, would leave the company.

The Israeli business newspaper Globes reported on Monday that Haimovich’s departure followed a major controversy at the subsidiary relating to violations of Microsoft’s code of ethics. It reported that several other managers had also left their positions.

Within weeks of launching the inquiry, Microsoft concluded that its initial findings showed Unit 8200 had violated its terms of service, which prohibit the use of its technology to facilitate mass surveillance. As a result, the company terminated the unit’s access to cloud services and AI products used to support the surveillance project.

Equipped with Azure’s near-limitless storage capacity and computing power, Unit 8200 built an indiscriminate system allowing its intelligence officers to collect, play back and analyse the content of millions of Palestinian cellular phone calls every day.

Details of the surveillance programme’s reliance on Azure sparked concerns among senior executives at Microsoft that some of its Israel-based employees may not have been fully transparent with headquarters about how Unit 8200 used the company’s technology.

Sources familiar with the inquiry, which involved lawyers at Covington & Burling, a US firm, said this had been one area of focus. According to Globes, Haimovich was summoned by the inquiry team after they visited Microsoft Israel’s offices near Tel Aviv.

Documents seen by the Guardian suggest Haimovich played a role in developing the relationship between Microsoft Israel and Unit 8200 following a 2021 meeting between Microsoft’s chief executive, Satya Nadella, and the unit’s then commander.

This included overseeing a partnership with the spy agency to build a segregated area within Azure to store sensitive intelligence material. Once complete, Unit 8200 began to move the expansive archive of everyday Palestinian communications into Microsoft’s cloud infrastructure.

Haimovich did not respond to a request for comment. In an email to staff announcing his departure last week, he said he had positioned Israel as “one of Microsoft’s fastest-growing markets worldwide”.

Microsoft has previously said its senior executives such as Nadella were unaware Unit 8200 was using Azure to store intercepted Palestinian communications. The company’s vice-chair and president, Brad Smith, said last year: “We do not provide technology to facilitate mass surveillance of civilians.”