The BBC chairman is to resign after the corporation came in for the harshest criticism in the report published by Lord Hutton.

Gavyn Davies tendered his resignation after Lord Hutton attacked the BBC's standards of accuracy and its failure to accept mistakes during the row with the government.

The Today programme report by journalist Andrew Gilligan, which triggered the row, was described by the peer as "attacking the integrity of the government" and "not in the public interest".

Broadcasting at 6.07am on May 29 last year, Gilligan said the government had knowingly made a false claim in its intelligence dossier that Iraq could launch weapons of mass destruction within 45 minutes.

The reporter said he had been told by "one of the senior officials in charge of drawing up that dossier... [that] the government probably knew that that 45 minute figure was wrong, even before it decided to put it in".

Gilligan also alleged that Downing Street "sexed up" the dossier by insisting that the 45 minute claim was included.

He later claimed in a newspaper article that this had been at the behest of communications director Alastair Campbell.

Lord Hutton said the broadcast was a "very grave allegation on a subject of great importance" and the specific claims about the dossier were "unfounded".

The BBC has subsequently accepted as unfounded the claim that ministers used the 45 minute figure knowing it was wrong, but did not do so immediately.

Lord Hutton also criticised the decision by BBC director of news Richard Sambrook not to check Gilligan's notes on his meeting with Dr Kelly before defending the report in a letter to Downing Street.

The Hutton report said this decision was a "failure of management".

"The BBC failed, before Richard Sambrook wrote his letter on June 27 to Alastair Campbell, to make an examination of Gilligan's notes to see if they supported the allegations he had made," Lord Hutton said.

"The BBC management failed to appreciate that the notes did not fully support the most serious of the allegations in the 6.07 broadcast."

Lord Hutton described the BBC's editorial system as "defective" for failing to know what Gilligan was going to say on air.

"I consider that the editorial system which the BBC permitted was defective in that Mr Gilligan was allowed to broadcast his report at 6.07am without editors having seen a script of what he was going to say and having considered whether it should be approved," he said.

Further faults were identified in the lack of communications between BBC managers and for allowing Gilligan to operate away from the main Today programme production team.

And the corporation's governors were criticised for failing to fully investigate the accuracy of the report before leaping to its defence.

"The governors are to be criticised for failing to make a more detailed investigation into whether the allegation by Mr Gilligan was properly supported by his notes and failing to give proper and adequate consideration to whether the BBC should publicly acknowledge that this very grave allegation should not have been broadcast," Lord Hutton said.

If they had done so, he added, they would have seen the story was wrong and "not in the public interest".

Lord Hutton noted that the governors were within their rights to defend the BBC from Campbell's allegation that there were anti-war elements in the corporation's reporting.

But they should have separated this complaint from the specific allegations regarding the dossier, he said.

"The governors were right to take the view that it was their duty to protect the independence of the BBC against attacks by the government and Mr Campbell's complaints were being expressed in exceptionally strong terms which raised very considerably the temperature of the dispute between the government and the BBC," he said.

"However Mr Campbell's allegation that the BBC had an anti-war agenda in his evidence to the FAC was only one part of his evidence.

"The government's concern about Mr Gilligan's broadcasts on 29 May was a separate issue about which specific complaints had been made by the government.

"Therefore the governors should have recognised more fully than they did that their duty to protect the independence of the BBC was not incompatible with giving proper consideration to whether there was validity in the government's complaints, no matter how strongly worded by Mr Campbell, that the allegations against its integrity reported in Mr Gilligan's broadcasts were unfounded and the governors failed to give this issue proper consideration."

The BBC has already overhauled its complaints system with the appointment of a new deputy director general and has also banned journalists from most freelance writing.

The corporation has also accepted that Downing Street should have been notified before the controversial report was aired.

Labour MPs called for answers from the corporation with some demanding resignations.

Gerald Kaufman, the chairman of the Commons culture, media and sport committee said "the BBC broadcast a lie [and] the chairman of the BBC railroaded an acquiescent board of governors into endorsing the lie".

Alastair Campbell also called on the corporation to restore public trust in its practices.

BBC director general Greg Dyke said aspects of the Today programme story were wrong and apologised but defended the right to investigate and air it.

"The BBC does accept that certain key allegations reported by Andrew Gilligan on the Today programme on May 29 last year were wrong and we apologise for them," he said.

"However, we would point out again that at no stage in the last eight months have we accused the prime minister of lying and we have said this publicly on several occasions.

"The dossier raised issues of great public interest. Dr Kelly was a credible source. Provided his allegations were reported accurately, the public in a modern democracy had a right to be made aware of them."

Davies had previously been seen as a New Labour ally and his wife runs the political office of chancellor Gordon Brown.

A former Goldman Sachs economist, he was criticised last summer for being too keen to prove his independence from the government by defending the BBC from Campbell's attack.

Gilligan's reputation as a journalist is now under serious threat.

The law lord said it "is not possible to say what Dr Kelly said to Mr Gilligan" because of inconsistencies in his records.

"However I am satisfied that Dr Kelly did not say to Mr Gilligan that the government probably knew or suspected that the 45 minutes claim was wrong before that claim was inserted in the dossier," he added.

"I am further satisfied that Dr Kelly did not say to Mr Gilligan that the reason why the 45 minutes claim was not included in the original draft of the dossier was because it only came from one source and the intelligence agencies did not really believe it was necessarily true."

The inquiry had also revealed an email from his Today programme editor Kevin Marsh noting his "loose use of language".

Gilligan's conduct also raised eyebrows when it emerged that he had emailed a member of the Commons foreign affairs committee disclosing details of a conversation that a fellow BBC reporter had with Dr Kelly.

This move was described as unacceptable by Dyke when he gave evidence to the inquiry.

But responding to the Hutton report through his trade union, he accused the law lord of being "grossly one-sided".

"Whatever Lord Hutton may think, it is clear from the evidence he heard that the dossier was 'sexed up', that many in the intelligence services were unhappy about it, and that Andrew Gilligan's story was substantially correct," National Union of Journalists president Jeremy Dear said.

"The report is selective, grossly one-sided and a serious threat to the future of investigative journalism".