The PM's adviser had been coming under pressure after pushing for the former minister to be given the job, despite the peer's relationship with convicted sex offender Jeffrey Epstein being publicly known about at the time.

McSweeney said he did not oversee the vetting but wanted to take "full responsibility" for advising the prime minister to appoint him.

It leaves Sir Keir battling to shore up his premiership as he continues to face anger from Labour MPs over his decision to hire the peer for the Washington role.

Sir Keir sacked Lord Mandelson in September, after emails emerged showing he sent supportive messages to Epstein as he faced charges for sex offences.

But further revelations this week from the latest release of Epstein files in the US about his continued contact with the late disgraced financier after his conviction in 2008 have led to fresh fury within Labour over the decision to hand him the role.

Emails suggesting the peer leaked sensitive government information to Epstein whilst a minister in the last Labour government have also prompted a police investigation into alleged misconduct in public office.

Sir Keir has said Lord Mandelson's prior relationship was Epstein was flagged when he was vetted for the role, whilst insisting the former cabinet minister misled him about the depth of the relationship.

But it has failed to contain the row over the decision, with a handful of Labour MPs now openly calling for Sir Keir to resign as party leader.

York Central MP Rachael Maskell told BBC Radio 4's Westminster Hour that the prime minister has a "very tight timetable… to prove that he has got it in him to lead us forward".

Alloa and Grangemouth MP Brian Leishman called on Sir Keir to "look at his own position" and question whether he should "resign for the good of the country and the Labour Party".

But others have thrown their support behind him.

Karl Turner, Kingston upon Hull East MP, told BBC Radio 5 Live Sir Keir knew it was "a catastrophic mistake" to appoint Lord Mandelson and "he wants to make good".

Rugby's MP John Slinger called for his party to "rally behind the prime minister", adding: "We don't ditch a leader just because the going gets tough."

Sir Keir will address Labour MPs in private on Monday evening, at the weekly Parliamentary Labour Party meeting, as he seeks to convince his backbenchers he can regain control.

It was earlier suggested that he might publicly address the episode on Monday but this is not thought to be the case at this stage.

It comes as the boss of the Fire Brigades Union, Steve Wright, became the first leader of one of Labour's 11 affiliated unions to call for the prime minister to go.

McSweeney's departure is a big blow to Sir Keir, with the 48-year-old Irishman having masterminded his successful bid for the Labour leadership in 2020 and the party's campaign for the general election in 2024.

His deputies Jill Cuthbertson and Vidhya Alakeson have been appointed acting chiefs of staff in the wake of his exit, Downing Street has confirmed.

In a statement on Sunday, McSweeney said Lord Mandelson's appointment in December 2024 had been "wrong", adding he had "damaged our party, our country and trust in politics itself."

"When asked, I advised the prime minister to make that appointment and I take full responsibility for that advice," he added.

"While I did not oversee the due diligence and vetting process, I believe that process must now be fundamentally overhauled.

"In the circumstances, the only honourable course is to step aside."

It is understood that both the prime minister and McSweeney decided now was the right moment for him to leave.

Sir Keir said it had been an "honour" to work with him, thanking him for "turning our party around" in the wake of its crushing defeat in the 2019 election.

Conservative leader Kemi Badenoch said it was "about time" McSweeney resigned, but added the prime minister "has to take responsibility for his own terrible decisions".

The Lib Dems said Sir Keir "can change his advisers all he likes, but the buck stops with him", while Reform said Labour is "just continuing the chaos we saw under the Tories".

The statement from McSweeney came just hours after a key Starmer ally had dismissed calls from within Labour for Sir Keir to sack his adviser.

Work and Pensions Secretary Pat McFadden told Laura Kuenssberg it would not make "any difference at all" to the situation facing the government.

He also called on Lord Mandelson to return or donate to charity the pay-off he received after his sacking as ambassador, thought to be up to £40,000.

The BBC understands Lord Mandelson's view is he answered questions about his relationship with Epstein in the vetting process accurately.

Email exchanges in the latest US government release on Epstein include several from Lord Mandelson during his time as a cabinet minister in the Labour government of Gordon Brown.

Among them is one that indicates Lord Mandelson gave Epstein advance notice of a €500bn bailout by the EU to save the Euro in 2010.

Another suggests he forwarded the financier an internal No 10 memo in 2009 discussing potential government asset sales in the wake of the financial crash.

Lord Mandelson has not responded to requests for comment but the BBC understands his position is that he has not acted in any way criminally and that he was not motivated by financial gain.

He has resigned as a member of the House of Lords, with the government pledging to introduce legislation required to strip him of his title.