sign_and_send_pubkey: signing failed for RSA from agent: agent refused operation

When trying to ssh to a machine using a public key, we got the following error:

ssh 'tux@192.168.1.10'
sign_and_send_pubkey: signing failed for RSA "/home/tux/.ssh/id_rsa" from agent: agent refused operation

The problem was with the local .ssh folder which had wrong permissions set. To fix the above problem, we issued the following commands:

chmod 700 ~/.ssh;
chmod 600 ~/.ssh/*;