Sir Keir Starmer has apologised to the victims of Jeffrey Epstein for believing Lord Mandelson's lies and appointing him as the UK's ambassador to the US.
The prime minister began a planned speech on funding to improve local communities by addressing the growing anger over how he had dealt with the issue.
While he acknowledged it had been publicly known for some time that Lord Mandelson knew Epstein, he said: None of us knew the depths and the darkness of that relationship.
However, Conservative leader Kemi Badenoch said the PM's position was untenable, while the Liberal Democrats called for a confidence vote to see if Labour MPs supported him.
The prime minister is facing calls from some of his own MPs to stand down.
While the handful of backbenchers to do so publicly are frequent critics of the PM, many more have raised concerns privately.
Sir Keir's former political director Luke Sullivan said he thought the PM was fighting for his premiership.
Seeking to defuse the row in a speech earlier, Sir Keir said he regretted appointing Lord Mandelson and would not have done so if he had known what he knows now.
Directly addressing Epstein's victims, he said: I am sorry, sorry for what was done to you, sorry that so many people with power failed you. Sorry for having believed Mandelson's lies and appointed him and sorry that even now you're forced to watch this story unfold in public once again.
Sir Keir has promised to release files, which he says will prove Lord Mandelson lied about the extent of his friendship with Epstein when he was being vetted for the US ambassador role.
Downing Street has insisted the PM has full confidence in his chief of staff.
In recent days, more documents released by the US Department of Justice have laid bare the extent of their relationship including emails suggesting Epstein made payments worth thousands of pounds to Lord Mandelson and his partner.
