Angela Eagle will challenge Jeremy Corbyn for the Labour leadership on Thursday, the BBC has been told.
It is understood the former shadow business secretary has the support of the 51 MPs needed to mount a challenge.
Ms Eagle is one of 20 members of the shadow cabinet to have quit since Sunday, after which MPs approved a motion of no confidence in Mr Corbyn.
Speaking in London, Mr Corbyn said not everyone agreed with him but he was determined to "carry on with his work".
Mr Corbyn's allies have accused rebel MPs of trying to "bully" him and say they believe he will win a leadership election.
A number of prominent union leaders have rallied behind Mr Corbyn, issuing a joint statement saying that the Labour leader had a "resounding mandate" and a leadership contest would be an "unnecessary distraction".
However, they go on, if a leadership election "occurs through the proper procedures we would expect all parts of the party to honour the result".
And a leaked e-mail from GMB general secretary Tim Roache, seen by the BBC, suggests he expressed concerns privately about Mr Corbyn's performance during the EU referendum campaign, which he described as "lacklustre".
The BBC's chief political correspondent Vicki Young said there was now a huge stand-off between two competing visions of the party - which could only be resolved by a leadership contest.
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Earlier, deputy leader Tom Watson ruled himself out of a potential contest and said Mr Corbyn was refusing to stand down despite his position being untenable.
Mr Watson said the Labour leader had rebuffed his calls to resign in the interests of the party, leaving Labour "in an impasse" which risked turning into an "existential crisis".
'Make it work'
Mr Corbyn has refused to "betray" party members who helped him win an overwhelmingly victory in last year's leadership election and his backers say a formal leadership contest would be needed to depose him.
Speaking after quitting Mr Corbyn's top team earlier this week, Ms Eagle - who has been an MP since 1992 and served in government under Gordon Brown - said she and others had tried to "make it work" under Mr Corbyn but had concluded it was no longer possible.
Seen as being on the centre left of the party, Ms Eagle - whose twin sister Maria is also a senior Labour politician - deputised for Mr Corbyn at prime minister's questions over the past nine months as shadow first secretary of state.
There has been speculation about whether Mr Corbyn would have the automatic right to stand under Labour Party rules or whether he will also need to secure 51 nominations from MPs and MEPs in order to get on the ballot paper.
If there is a contest, result is likely to be announced at Labour's party conference in September or in the weeks running up to it.
Addressing students in central London at an event organised by the pressure group Momentum, Mr Corbyn said he had a "mandate from hundreds of thousands of people" following his election victory last year and he was "proud to be carrying on with that work".
Arguing that his cause was "not about one individual", he said he wanted to move Labour away from a pro-austerity "economic orthodoxy" which it embraced at the last election and change the way politics was done in the country.
Confronted at one point over the EU referendum - with one heckler saying "where were you when we needed you?" - Mr Corbyn said it was not his preferred outcome but he recognised the "anger and desperation" which led many people to vote to leave the EU.
Shadow chancellor John McDonnell said Mr Corbyn was "buoyant" and "if there is another election, he will stand and I think he will win"
Mr McDonnell called for supporters of Mr Corbyn to show "absolute determination, courage but above all else solidarity" in the face of attempts to change the direction of the party: "We're not going to be bullied by Labour MPs who refuse to accept democracy in our party".
Labour's deputy leader said he had been talking to Mr Corbyn to try and negotiate his departure in the face of mounting calls for him to step aside - including from ex-leaders Ed Miliband, Harriet Harman and Gordon Brown - but that he was refusing to budge.
"I have spent the week trying to bring people together and find a negotiated settlement," he told the BBC's Laura Kuenssberg. "I went to see Jeremy... but he was unwilling to move from the position he is in so we are still in an impasse."
Asked whether he had told Mr Corbyn to his face that he had to quit, Mr Watson said he agreed with Scottish Labour leader Kezia Dugdale who said on Tuesday that if she had lost the confidence of her colleagues in such a decisive way that she would not be able to do her job.
"Unfortunately, that is true for Jeremy. It is a great tragedy. He does have a members' mandate but those members who join a political party also know you need a parliamentary mandate if you are to form a government."
Mr Watson said he would like to apologise to the public for the "mess" that Labour found itself in and suggested that Mr Corbyn's allies, notably Mr McDonnell, were behind efforts to keep him in position.
"They are a team and they have decided they are going to tough it out. It looks like the Labour Party is heading for some form of contested election... I think that is where it is heading."
Mr Watson said his role was to try and bring the party together and ensure the schism over the leadership was settled in as "swift, fair and amicable" a fashion as possible, adding that if there was another contest, members had to focus on choosing someone who could be PM.
"My party is in peril. We are facing an existential crisis and I just don't want us to be in this position because I think there are millions of people in the country who need a left-leaning government, who can give people opportunity and right now we're not doing that."