BBC chairman Gavyn Davies has resigned after the corporation's board of governors accepted his decision to carry the can for Lord Hutton's damning verdict on the BBC's handling of the David Kelly affair.
He said he was writing to the prime minister this evening to advise him of his decision to fall on his sword.
"I've been brought up to believe that you cannot choose your own referee and that the referee's decision is final," he said in a brief statement tonight.
"There is an honourable tradition in British public life that those charged with authority at the top of an organisation should accept responsibility for what happens in that organisation.
"I am therefore writing to the prime minister today to tender my resignation as chairman of the BBC, with immediate effect," he added.
Mr Davies handed in his notice at 5pm at an informal meeting of the governors, who were heavily criticised for failing to act as a check on the corporation's "defective" journalistic practices.
Lord Hutton lambasted Mr Davies and his colleagues on the board for their failure to check the facts behind Andrew Gilligan's report and the speed with which they squared up to the government without first quizzing management on the merits of the story.
The governors are due to meet formally tomorrow, when they are expected to respond to Lord Hutton's virulent criticism.
Davies carries can for backing Gilligan
As chairman of the board of governors, Mr Davies has decided to carry the can for his insistence on backing Andrew Gilligan's allegation that the government "sexed up" the Iraqi dossier without checking the facts.
His resignation came just hours after vindicated former Downing Street communications chief Alastair Campbell pointedly said that if a similar verdict had been delivered against the government there would already have been "several resignations at several levels".
The former economist, who has close ties to the Labour party and is married to Gordon Brown's PA, Sue Nye, has sustained criticism since he joined the BBC in October 2001.
At the time his appointment was attacked as another example of cronyism and in recent weeks he has been criticised for giving an interview in which he said the BBC would not be making any more fundamental reforms in the wake of the Hutton report.
But the scale of the attack on the BBC came as a complete shock, particularly because there was so little balancing criticism of the government, the Ministry of Defence or Downing Street aides, who had described the battle with the BBC as "a game of chicken".
In a devastating verdict, Lord Hutton said the governors should have investigated whether Gilligan's allegations were properly supported by his notes and failed to give proper consideration to "whether the BBC should publicly acknowledge that this very grave allegation should not have been broadcast".
And in a devastating indictment Lord Hutton said the governors should have asked to see Gilligan's notes and then "questioned whether it was right for the BBC to maintain that it was in the public interest to broadcast that allegation".
Labour's Gerald Kaufman, the chair of the culture select committee and one of the corporation's most vociferous critics, went on the immediate attack.
He said the report confirmed what he had been saying for months, namely that the BBC "broadcast a lie". He said Mr Davies had "railroaded an acquiescent board of governors into endorsing the lie".
Sir Paul Fox: BBC's biggest crisis since Suez
Sir Paul Fox, the former head of BBC TV, said the corporation faced its "most serious crisis the BBC has experienced since Suez" and warned that "it would be foolish of the BBC to try and fight this".
"This comes at a very difficult time with the BBC facing charter renewal and clearly something has to be done.
"This is a report that absolves everybody except the BBC. The criticism, I'm not talking about Gilligan story, it's the editorial controls, the lack of management and the fact the governors rushed to judgment; if the BBC tries to fight this criticisms they will be in even bigger trouble."
Jon Snow: it's a dark day for journalists
Channel 4 broadcaster Jon Snow said that the death of David Kelly might end up robbing the country of "the best public service broadcaster in the world". In his "snowmail" daily email service, he added: "This is one of the most worrying and difficult days of my broadcasting career," said Jon Snow.
Greg Dyke should go, says Chris Bryant
Labour backbencher and member of the culture select committee Chris Bryant said BBC director general Greg Dyke should be the one to resign.
He said Lord Hutton's criticism of the BBC's editorial system struck at the heart of the corporation's credibility. "It is the editor in chief, the director general, who really should be tendering his resignation."
And the ITN political editor, Michael Brunson, said Gilligan had made "one of worst mistakes a journalist could make".
He added: "It was a very grave attack on the integrity of the government which was unfounded. However much we may want to disagree with it we all have to live with what the judge said. It has amazingly serious consequences for the BBC.
"It is time for the BBC to come under the Ofcom umbrella. What the judge is saying is the board of governors failed in the protection of public interest."
Greg Dyke: we've already apologised
The BBC director general is toughing out criticism aimed at the corporation by Lord Hutton, insisting the BBC has already owned up to many of the mistakes highlighted in his report and taken action to remedy these.
He has apologised for errors in Andrew Gilligan's report on the Today programme on May 29 2003, but insisted the BBC has not once accused the prime minister of lying during the last eight months.
Mr Dyke stressed that the BBC had already overhauled its complaints system, banning journalists from writing for newspapers and appointed Mark Byford as deputy director general with special responsibility for complaints.
"Dr Kelly's death was a tragedy for his family and again we offer our condolences to them," he said in a televised statement.
"We note Lord Hutton's criticisms of the BBC. Many of these relate to mistakes which the BBC has already acknowledged in its submissions to the inquiry and for which we have already expressed regret.
Atmosphere at BBC is grim
Journalists within the BBC said the atmosphere was "not good" and everyone was bracing themselves for the fallout.
However, BBC sources said the criticisms of the corporation were not unexpected but they took issue with the lack of balancing criticism of the government and the Ministry of Defence in their handling of the Kelly affair.
"The BBC does accept that certain key allegations reported by Andrew Gilligan on the Today programme on May 29 last year were wrong and we apologise for them," said Mr Dyke.
"However we would point out again that at no stage in the last eight months have we accused the prime minister of lying and we have said so publicly on several occasions.
"The dossier raised issues of great public interest. David Kelly was a credible source. Provided his allegations were reported accurately, the public in a modern democracy had a right to be made aware of them. The greater part of the BBC's coverage of the dossier fulfilled this purpose," he added.
"We've already taken steps to improve our procedures. New complaints and compliance structures have been put in place under the deputy director general.
"We have a new set of rules for BBC journalists who wish to write for newspapers or magazines, and we will be publishing revised editorial guidelines.
"There are other findings in the report including those about the dossier which we will consider carefully.
The corporation's critics are likely to seize on Lord Hutton's verdict as evidence that Mr Davies was too close to the director general and saw his role as defending the corporation rather than regulating it. The chairman argued that he was acting on behalf of licence fee payers and not BBC management.
"The governors should have realised more fully than they did that their duty to protect the independence of the BBC was not incompatible with giving proper consideration to whether there was validity in the governments complaints," said Lord Hutton.
Minutes of the governors' meeting released on July 6 showed that the governors and Mr Davies had their own concerns about Gilligan's broadcast.
However, they believed that the principle of defending the BBC's journalism was more important than expressing their concern over the reporting of the story. "If you say it tonight, you are disowning Andrew Gilligan," Mr Davies told them.
Mr Davies warned his fellow governors, who were fearful that the government was using the issue as a stick with which to beat the corporation in the run-up to charter renewal.