Mr Mandelson is a key ally of Tony Blair

The prime minister said the Hartlepool MP had the right skills and contacts and was "the best man for the job".

The move represents a remarkable political comeback for Mr Mandelson, who has twice resigned from the cabinet in controversial circumstances.

Tory co-party chairman Liam Fox said Mr Mandelson would not stand up for the UK in Europe as he was too pro-European.

Dr Fox also questioned whether "someone with his track record" could be trusted in such an important role.

The appointment will trigger a Westminster by-election in Mr Mandelson's Hartlepool seat, which despite a 15,000 Labour majority is already being talked of as a winnable target by the Liberal Democrats and UKIP.

This appointment of Mandelson shows that the European Union is a gravy train for failed politicians Robert Kilroy-Silk MEP Profile: Peter Mandelson MPs split over Mandelson job Kilroy 'may stand in Hartlepool'

In a statement, Mr Mandelson said he was "delighted" to have been nominated for the post - but added he had agonised over whether to take it because of the loyalty of his Hartlepool constituents.

"I hesitated, too, because for better or worse, I have been one of the principal architects of New Labour and I have worked closely with Tony Blair and the team for nearly 20 years."

Mr Mandelson is reported to have wanted to return to the cabinet for a third time - but the idea was dropped after fierce opposition from some senior ministers, including John Prescott.

HAVE YOUR SAY How astute of Mr Blair to make such appointment during the Parliamentary recess Michael Owen, Bristol Send us your comments

The Hartlepool MP denied this in an interview with BBC News 24, saying: "That wasn't an issue. It's not something that was discussed."

In an interview with Sky News, Mr Mandelson acknowledged he had enemies in some quarters but said: "I hope people will say love him or loathe he is a strong guy and we need a person to bat for a strong Britain in Europe."

He said he had paid a "very high price" for his mistakes and that he had no intention of letting Mr Blair or Britain down in his new post.

MANDELSON'S NEW JOB He will be the only UK politician on Europe's main decision-making body As a commissioner he will help draft proposals for new EU laws Commissioners also make sure EU laws are enacted Former commissioners include Leon Brittan and Roy Jenkins The 25 Commissioners earn �145,000 yearly salaries They also get allowances for staying out of town What do EU commissioners do?

The prime minister said he had chosen Mr Mandelson because he was simply the "best person for the job".

"He has got the right skills, the talent, ability and contacts in Europe.

"Europe is Britain's biggest economic market. It has expanded to 25 countries and this is a really critical appointment and we have got to get the best person and I think he is the best person for the country."

A No 10 spokesman said Mr Blair spoke to new European Commission President Jose Manuel Durao Barroso earlier on Friday morning, and that the nomination received "a positive response".

The appointment will have to be ratified by MEPs, but they can only veto it by rejecting the European Commission as a whole.

MANDELSON'S CAREER 1979-82 Lambeth councillor 1982-85 producer at London Weekend Television Late 1980s Director of Labour Party Campaigns and Communications 1992 Became MP for Hartlepool 1994 supported Blair's leadership bid 1997 Ran Labour's election campaign 1997 Named Cabinet Minister Without Portfolio 1998 Secretary of State for Trade and Industry 1998 Resigned over Geoffrey Robinson house loan affair 1999 Returned as Secretary of State for Northern Ireland 2001 Resigned over Hinduja passports affair

After a week of wrangling over the European Commission role, and with Parliament beginning its summer recess, an expected cabinet re-shuffle is now thought to have been postponed by Mr Blair until the autumn.

Glasgow Pollok MP Ian Davidson, of lobby group Labour against a Superstate, branded Mr Mandelson's appointment "appalling" example of "cronyism" which would be seen as "arrogant" by voters.

It comes ahead of what could be a lengthy run-up to a referendum on the new European Constitution.

Britain's two current commissioners, ex-Labour leader Neil Kinnock and former Tory chairman Chris Patten, are stepping down.

EU enlargement means Britain will now have only one commissioner.