“You know, "power corrupts, and absolute power corrupts absolutely"? It's the same with powerlessness. Absolute powerlessness corrupts absolutely. Einstein said everything had changed since the atom was split, except the way we think. We have to think anew.”

Letter http://oll.libertyfund.org/index.php?option=com_content&task=view&id=1407&Itemid=283 to Mandell Creighton (5 April 1887), published in Historical Essays and Studies, by John Emerich Edward Dalberg-Acton (1907), edited by John Neville Figgis and Reginald Vere Laurence, Appendix, p. 504; also in Essays on Freedom and Power (1972)
Paraphrased variant: All power tends to corrupt and absolute power corrupts absolutely.
Context: I cannot accept your canon that we are to judge Pope and King unlike other men, with a favorable presumption that they did no wrong. If there is any presumption it is the other way against holders of power, increasing as the power increases. Historic responsibility has to make up for the want of legal responsibility. Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or the certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it. That is the point at which the negation of Catholicism and the negation of Liberalism meet and keep high festival, and the end learns to justify the means.

Source: Lullaby (2002), Chapter 9

Section 13; often the final portion of this is quoted alone as: "Absolute faith corrupts as absolutely as absolute power."
Reflections on the Human Condition (1973)
Context: The Savior who wants to turn men into angels is as much a hater of human nature as the totalitarian despot who wants to turn them into puppets.
There are similarities between absolute power and absolute faith: a demand for absolute obedience; a readiness to attempt the impossible; a bias for simple solutions — to cut the knot rather than unravel it; the viewing of compromise as surrender; the tendency to manipulate people and "experiment with blood."
Both absolute power and absolute faith are instruments of dehumanization. Hence absolute faith corrupts as absolutely as absolute power.

This quote is often misattributed to John Lehman, but it apparently was actually said by Donald Regan, President Reagan's chief of staff, to a 1987 Gridiron Dinner audience. http://www.johnflehman.com/books/books_makingwar_vulnerable.html
Misattributed

Source: Steelheart

Editorial in Analog Science Fiction/Fact magazine (1970)

Source: There Will Be Time (1972), Chapter 10 (p. 107)