British Prime Minister Boris Johnson says he will table a motion for a general election after being defeated in the House of Commons.
The call comes after MPs triggered a vote that could allow them to stop him pursuing a no-deal Brexit.
It was a defeat the government warned would prompt the Prime Minister to seek an election on October 14.
Despite a warning that Johnson would seek an election if they tied his hands over Brexit, a bloc of opposition MPs and rebels in Johnson's Tory Party defied him with what they cast as an effort to stop an economically ruinous no-deal departure.
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That set up a historic showdown between Prime Minister and Parliament in a country once touted as a confident pillar of Western economic and political stability.
Sterling flirted briefly with some of its lowest levels since 1985.
"This is parliament's last chance to block a no-deal exit on the 31st of October," Oliver Letwin, who led the attempt to thwart Johnson's Brexit gamble, told parliament on Tuesday.
Opposition Labour Party leader Jeremy Corbyn said MPs were seeking to prevent Johnson "playing Russian roulette with this country's future".
On parliament's first day back from its summer break, they put forward a motion to grab control of parliament on Wednesday - a step that, after a debate granted by the Speaker, was to go to a House of Commons vote at about 9pm local time on Tuesday (0600 AEST Wednesday).
If MPs are granted control of the parliamentary business, they will seek on Wednesday to pass a law that would force Johnson to ask the EU to delay Brexit for three months until January 31, 2020 unless he has a deal approved by parliament, or parliament agrees to a no-deal Brexit.
Johnson cast the challenge as an attempt to force Britain to surrender to the EU just as he hopes to secure concessions on the terms of the divorce - a step he said he would never accept.
"It means running up the white flag," Johnson said. "It is a bill that, if passed, would force me to go to Brussels and beg an extension. It would force me to accept the terms offered. It would destroy any chance of negotiation for a new deal."
Just as Johnson began speaking, he lost his working majority in parliament when one of his own Conservative MPs, Phillip Lee, crossed the floor of the House of Commons to join the pro-EU Liberal Democrats.
Labour's Corbyn told parliament that Johnson's was a government with "no mandate, no morals and, as of today, no majority".
In the eye of the Brexit maelstrom, it was unclear if opposition parties would support any move to call an election, which requires the support of two-thirds of the 650-seat House of Commons.
The Labour Party's chief enforcer said the party would not allow Johnson to manipulate an election to force through a no-deal Brexit, a source said.
Fears of an abrupt "no-deal" Brexit were rising elsewhere.
The European Commission said such a scenario was a "very distinct possibility" and French Foreign Minister Jean-Yves Le Drian said it was the most likely scenario.
The UN trade agency UNCTAD said it would cost Britain at least $US16 billion ($A24 billion) in lost exports to the EU, plus a further substantial sum in indirect costs.
Reuters
