Sadiq Khan has called for commissioners to take over the running of Kensington and Chelsea Council after its leader and deputy leader quit in the wake of the Grenfell Tower disaster.
Nicholas Paget-Brown said he had to share responsibility for "perceived failings" by the authority in the aftermath of the tragedy which claimed at least 80 lives.
His deputy, Rock Feilding-Mellen, also intends to stand down from the council, which also lost its chief executive Nicholas Holgate, following a barrage of criticism over the authority's response to the fire.
The Mayor of London, who welcomed the resignation, said the Government had "no option" but to appoint "untainted" commissioners who had "a genuine empathy for local people and the situation they face" to take over running the authority.
He said: "The council now needs to find a way to move forward and find a way to restore the confidence in that community.
"That can only be done with new leadership and a new approach that reaches out to residents who quite rightly feel desperately neglected.
"I ... feel the response from the council and subsequent breakdown in trust is so severe that there is now no alternative and the Government needs to step in quickly."
Commissioners were brought in to run Tower Hamlets Council in 2014, following a critical independent report into the council's award of grants and sale of properties under former mayor Lutfur Rahman.
It comes as Jeremy Corbyn said he had written to Prime Minister Theresa May urging her to increase the scope of the public inquiry.
He asked for a two-part inquiry, the first looking at specific issues around the fire in at the 24-storey building in west London, with an additional second part "looking at the national issues".
In his resignation statement, Mr Paget-Brown acknowledged the council had been criticised for "failing to answer all the questions that people have" but that the scale of the tragedy "was always going to mean that one borough alone would never have sufficient resources to respond to all the needs of the survivors and those made homeless, on its own".
He said: "As council leader I have to accept my share of responsibility for these perceived failings.
"In particular, my decision to accept legal advice that I should not compromise the public inquiry by having an open discussion in public yesterday, has itself become a political story.
"And it cannot be right that this should have become the focus of attention when so many are dead or still unaccounted for.
Retired Court of Appeal judge Sir Martin Moore-Bick has been chosen to lead the Grenfell Tower inquiry (AFP/Getty Images)
"I have therefore decided to step down as leader of the council as soon as a successor is in place.
"They will appoint a new deputy leader and cabinet."
Labour backed Mr Khan's call to send in commissioners to take over the whole of the council, saying oversight of long subcontracting chains and checks and accountability for outsourced services like housing have failed.
Journalists wait to gain access to the Kensington and Chelsea council meeting (GettyImages)
Shadow housing secretary John Healey said the move would amount to "specific, immediate, obvious and necessary action".
He told BBC Radio 4's Today programme: "It's right, it's necessary, it is a big step for Government to take, but this council has not been doing the job for the Grenfell Tower residents or the community around north Kensington, especially on housing and family support after the fire.
"But most importantly, and this is the point that others have made, the public and residents' trust can't be restored by simply replacing the leader and deputy leader by other politicians from the same political group at this stage.
"This is where ministers need to step in, they've been off the pace at every stage in this tragedy, too slow to grasp the scale of the problems and too slow to act, and they need to act on this front now.
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