Mr Kennedy had tried to tough out the crisis, vowing to remain as leader pending a full leadership contest in which he would stand as a candidate for his own job.

But after 25 Liberal Democrat MPs gave him an ultimatum to quit yesterday, Mr Kennedy was forced to bow to the inevitable and announced his immediate resignation this afternoon from the post that he has held since 1999.

In a statement in the same panelled room at Lib Dem headquarters where he made his dramatic statement about his drinking problem on Thursday afternoon, Mr Kennedy said that although he enjoyed wide backing among party members, he clearly had insufficient support among the parliamentary party.

“In all of this the interests of the party have to come first. That is where my personal, political and constitutional duty lies,” he said.

“Accordingly, I am announcing today that when nominations open for the leadership of the party I shall not now be putting my name forward – and I am standing down as leader with immediate effect.”

Mr Kennedy added that it was important that the election be held as soon as possible so that the Lib Dems have a new leader by crucial local elections in May.

The affable 46-year-old Scot was generally considered his party’s most effective leader of modern times, both personable and persuasive. He won much praise for his decision to oppose the invasion of Iraq on principle and for his opposition to student top-up fees.

But although the party enjoyed its best result for 80 years in May’s general election, many Lib Dem MPs thought it should have done even better given the disarray in the major parties and widespread anger among voters at the Iraq war. There was also an increasing worry that Mr Kennedy’s drinking was impairing his capacity to act as leader.

Mr Kennedy’s deputy, the well-respected Sir Menzies Campbell, will take over as acting leader pending a leadership contest that he will enter as favourite – although he may be seen as too old to be more than a caretaker leader. Sir Menzies tonight paid a warm tribute to Mr Kennedy from his home in Edinburgh and confirmed that he would be a leadership contender.

Strong challenges can also be expected from Simon Hughes, the party president, and its home affairs spokesman, Mark Oaten, who were both at the party's Cowley Street HQ to hear the statement.

The education spokesman Ed Davey, one of the organisers of the ultimatum to Mr Kennedy to quit, may also stand. The work and pensions spokesman David Laws, the former MEP Nick Clegg, and Susan Kramer, the former Lib Dem candidate for the London mayoralty, are considered outside candidates.

Mr Kennedy said that his successor would enjoy his full support as "a loyal backbench Liberal Democrat MP".

But he took time out in his resignation statement to warn the party that it had "serious internal political issues to address further and to resolve", although these were not "irreconcilable".

"We are established as serious players in the changing reality which is three-party politics across Britain,” Mr Kennedy said. "I believe that to be a good inheritance and a great opportunity, one in which I look forward to continuing to play my party."

Mr Kennedy also told his party colleagues that they had to ensure that the debate on the future of the party should be based on the principles underlying the party’s existence and should not be dictated by outsiders.

Mr Kennedy’s insistence that he still retains support among local party activists and members was at odds with a preliminary YouGov poll for today’s Daily Telegraph, which showed that 65 per cent of Lib Dem members wanted him out. The poll showed Sir Menzies enjoying a clear lead in the forthcoming contest.

But although the resignation will come as a relief to many Lib Dem MPs, the crisis that preceded it leaves the party badly divided, both in terms of personalities and politics.

Some of Mr Kennedy’s closest allies, including the Welsh Lib Dem leader Lembit Opik, have accused his critics of hounding him out of office through a whispering campaign conducted through anonymous briefings with journalists.

His critics say that Mr Kennedy simply refused to read the writing on the wall and even though he claimed not to have had a drink in two months, he was in denial about his looming political demise.

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