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Boris Johnson's press chief offered to quit after it emerged he had given a speech at a Downing Street party held when Covid restrictions were in place, two separate sources have told the BBC.
The sources say the PM refused to accept Jack Doyle's resignation.
Downing Street insists Mr Doyle did not offer to quit, and the PM has since declared his "full confidence" in him.
The government has launched an inquiry into the party, attended by up to 30 people on 18 December last year.
Labour leader Sir Keir Starmer called the prime minister "unfit for office" and said it was important to "get to the bottom" of what had happened, including whether Covid rules had been broken.
A total of 58,194 new UK coronavirus cases were reported on Friday - the highest number since January and the sixth largest daily amount since the pandemic started.
The Downing Street gathering on 18 December last year took place two days after London had gone into Tier 3 lockdown restrictions, meaning people could not mix indoors with anyone outside their household or support bubble.
No 10 has refused to explain how this complied with the rules in place at the time.
Mr Doyle attended the event, gave a speech and handed out award certificates to staff.
Downing Street initially denied that a party had taken place on that date, but has now launched an investigation into what happened and whether Covid rules were broken.
Meanwhile, this year's Downing Street party has been cancelled.
A government spokesperson said it had been the "intention" to hold a celebration for staff, but that this had changed following the announcement this week of more Covid measures in England, including the compulsory wearing of masks on public transport and in shops.
Who is Jack Doyle?
- The former Daily Mail political reporter became the prime minister's press secretary in 2020
- He was promoted to Downing Street director of communications in April this year
- He is not the PM's official spokesman - but is in charge of how the government gets its message across to the media
- It is the role held by Alastair Campbell, when Labour was in power
- Mr Doyle earns between £140,000 and £144,999 a year
Amid criticism from opposition parties, the media and his own MPs, the prime minister this week asked Cabinet Secretary Simon Case to carry out an investigation into the 18 December party.
In his inquiry, Mr Case will also examine a Downing Street gathering on 27 December last year, and another at the Department for Education on 10 December.
The inquiry could be widened out if it considered there are credible allegations about other events.
Government spokeswoman Allegra Stratton quit her post on Wednesday after a backlash over a video she appeared in from last December, in which she joked about a Christmas party.
The government's chief whip Mark Spencer told BBC Radio Nottingham that Mr Johnson "will not have lied" about any parties that took place in Downing Street.
He added that the 18 December event had been a "meeting" rather than a social get-together, and that staff had discussed how to deal with coronavirus.
But Labour's Sir Keir, speaking during a visit to Northumberland, said: "It's absolutely important that we get to the bottom of this.
"This is just the latest allegation of dishonesty from the prime minister. We've had lie upon lie in relation to the parties going on in Downing Street.
"The prime minister is not fit for office... The government is up to its neck in dishonesty."