Richard Lee said he was left with no alternative when his town board asked him to hand over his badge, his uniform and the keys to his patrol car.
“I gave them my shirt, I gave them my turtleneck, I gave them my ballistic vest,” said Lee, who was his town's only law enforcement officer.
“I sat down in the chair, took off my boots, took off my pants, put those in the chair, and put my boots back on, and walked out the door.”
He then set off home, trudging for three-quarters of a mile wearing only his boots, hat and underwear, before being picked up by his wife and driven the rest of the way.
Mr Lee had been employed by the town of Croydon for 20 years and served as its only police officer and prosecutor.
On Tuesday night the three-member selectboard voted to eliminate his department, which was said to cost the town $40,000 (£31,000) a year.
From now on the community will rely on the New Hampshire state police, who already carried out patrols when Mr Lee was off-duty.
“We didn’t feel we were getting the value for our money,” board chair Russell Edwards told the local Union Leader newspaper.
Mr Lee said he was consulting a lawyer about the incident, and claimed that he took off his uniform on request because he did not want to face the possibility of being arrested.
Additional reporting by Associated Press