Shadow foreign secretary Hilary Benn has been sacked from the shadow cabinet amid claims he was encouraging ministers to resign should Jeremy Corbyn ignore a vote of no confidence, BBC reports.
Labour's leader faces a vote of no confidence over claims he was "lacklustre" during the EU referendum.
A Labour source told the BBC Corbyn had "lost confidence" in Benn.
Benn said there was "widespread concern" about Mr Corbyn's "leadership and his ability to win an election".
He added: "There is no confidence to win the next election if Jeremy continues as leader.
"In a phone call to Jeremy I told him I had lost confidence in his ability to lead the party and he dismissed me."
The Labour party campaigned for Remain during the referendum, which saw the UK voting to leave the EU by 52% to 48% on Thursday.
Senior Labour sources also told the BBC that a significant number of shadow cabinet resignations were likely if Corbyn were to ignore the result of the confidence vote.
Labour MPs Dame Margaret Hodge and Ann Coffey submitted a motion of no confidence against Corbyn - who campaigned on the losing Remain side - in a letter to the Parliamentary Labour Party (PLP) chairman John Cryer on Friday.
The motion has no formal constitutional force but calls for a discussion at the next PLP meeting on Monday.
The chairman will decide whether it is debated. If accepted, a secret ballot of Labour MPs could be held on Tuesday.
Labour MPs reacted with criticism to Corbyn's move to sack 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."
Wes Streeting, Labour's MP for Ilford North, 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."