Morgan McSweeney, Keir Starmer’s chief of staff, has quit his role as the prime minister’s closest aide amid anger over his role in the appointment of Peter Mandelson as US ambassador.

His position had grown increasingly untenable as pressure on Starmer mounted over the scandal, which followed the release of emails underlining the extent of Mandelson’s relationship with the convicted child sex offender Jeffrey Epstein.

McSweeney resigned saying he took “full responsibility” for advising Starmer to appoint Mandelson, a decision that had undermined trust in Labour, the country and politics itself, and that it was the “honourable course” for him to go.

However, his departure will come as a major blow to the prime minister, who has lost a string of close advisers in recent months, and who relied on his political judgment, even though No 10 often came under fire as a result.

In a statement released to the Guardian, McSweeney said: “After careful reflection, I have decided to resign from the government. The decision to appoint Peter Mandelson was wrong. He has 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. In public life responsibility must be owned when it matters most, not just when it is most convenient. In the circumstances, the only honourable course is to step aside.”

He continued: “This has not been an easy decision. Much has been written and said about me over the years but my motivations have always been simple: I have worked every day to elect and support a government that puts the lives of ordinary people first and leads us to a better future for our great country. Only a Labour government will do that.

“I leave with pride in all we have achieved mixed with regret at the circumstances of my departure. But I have always believed there are moments when you must accept your responsibility and step aside for the bigger cause.”

McSweeney concluded: “As I leave I have two further reflections: firstly, and most importantly, we must remember the women and girls whose lives were ruined by Jeffrey Epstein and whose voices went unheard for far too long.

“Secondly, while I did not oversee the due diligence and vetting process, I believe that process must now be fundamentally overhauled. This cannot simply be a gesture but a safeguard for the future.

“I remain fully supportive of the prime minister. He is working every day to rebuild trust, restore standards and serve the country. I will continue to back that mission in whatever way I can. It has been the honour of my life to serve.”

The loss of McSweeney, who began his career trying to oust the hard left from Labour in Lambeth, south London, is particularly emblematic given his pivotal role in the Starmer project and the transformation of Labour in the lead-up to the 2024 election.

Despite his success in guiding Labour to a huge majority, McSweeney had critics within the party and particularly among MPs, a number of whom complained he presided over an unnecessarily factional, petty and cliquey Downing Street operation.