Jeremy Corbyn is facing an open revolt after sacking Hilary Benn from the shadow cabinet.
Shadow health secretary Heidi Alexander was the first member of Mr Corbyn’s top team to quit over the dismissal.
Ms Alexander said she was doing so with a “heavy heart” as she posted her resignation letter to Mr Corbyn on Twitter, which stated: “As much as I respect you as a man of principle, I do not believe you have the capacity to shape the answers our country is demanding and I believe that if we are to form the next government, a change of leadership is essential.”
Up to half of Labour’s top team are ready to resign, according to BBC reports.
Mr Benn said there was “widespread” worry among Labour MPs and in the shadow cabinet over Mr Corbyn’s ability to win a snap election in the wake of David Cameron’s resignation.
At a “critical” time for the country, the Labour Party requires strong and effective leadership, he added.
“It has now become clear that there is widespread concern among Labour MPs and in the shadow cabinet about Jeremy Corbyn’s leadership of our party,” he said in a statement.
“In particular, there is no confidence in our ability to win the next election, which may come much sooner than expected, if Jeremy continues as leader.
“At this critical time for our country, following the result of the EU referendum, we need strong and effective leadership of the Labour Party that is capable of winning public support so that we can stand up for the people of Britain.
“In a phone call to Jeremy, I told him that for these reasons I had lost confidence in his ability to lead the party and he then dismissed me from the shadow cabinet.”
A Labour spokesman told the Press Association that Mr Corbyn sacked the shadow foreign secretary “on the grounds that he has lost confidence in him”.
Former minister Ben Bradshaw told the BBC that Labour faces “wipe-out” in an expected autumn snap election if Mr Corbyn remains leader.
The sacking follows claims in the Observer that Mr Benn called fellow MPs over the weekend to take soundings about a putsch.
The party leader has faced accusations from his own MPs that he led a weak campaign in the EU referendum and is facing a motion of no confidence.
Mr Benn was reportedly planning to ask Mr Corbyn to stand down and had asked other senior frontbenchers to quit with him if the leader refused to budge.
But Mr Corbyn has made it clear he will fight any move against him by MPs and rely on the backing of grass root party members if it comes to a leadership challenge.
Some Labour MPs were quick to criticise Mr Corbyn over his decision to sack Mr Benn.
Shadow housing minister Roberta Blackman-Woods said: “This is sad news indeed and I cannot understand how Jeremy thinks it will help his worsening position with the PLP.”
Labour MP Wes Streeting said: “Lots of good people chose to serve in shadow cabinet to keep the show on the road. There are no longer good reasons for good people to stay.”
Writing in The Observer before Mr Benn’s sacking, former shadow cabinet member Tristram Hunt called for Mr Corbyn’s removal.
Pro-Brexit Labour MP Graham Stringer said there were “fundamental differences” between the pair on policy including the Middle East, Trident and Europe and the sacking was “inevitable”.
He said the Labour Party is in a “state of crisis” but it was not the time for the party to “go to war” with the majority of party members who voted for him to be leader.
Labour’s leadership turmoil comes as the Conservatives are consumed by their own post-referendum leadership frenzy.
Senior Tories are preparing to fight for the PM’s job, with a section of the party launching a “Stop Boris” campaign.
Mr Cameron announced he would step down in time for the Conservative conference in October, but is coming under increasing pressure from Brussels to initiate a divorce from Europe.
The political backlash unleashed by Brexit saw pro-Remain Tories scramble to unite behind a candidate strong enough to try to stop Boris Johnson becoming prime minister.
Home Secretary Theresa May is consolidating her position as the main potential “Stop Boris” candidate, as Europe piled pressure on Mr Cameron to go before his stated departure date of October so that tough talks on the Brexit “divorce” deal can begin in earnest.
A spokesman for Mr Corbyn insisted he has no intention of resigning.
“Jeremy Corbyn is the democratically elected leader of the Labour Party and will remain so,” the spokesman said.
Mr Corbyn has pulled out of a speech at the Glastonbury Festival on Sunday, which would have seen him make his first ever appearance at the event to discuss the Brexit vote with revellers.