Entwistle, only two months in office, took the fall for failing to uphold journalistic standards.
"Newsnight," a prime news program of BBC, accused Lord McApline, a former Conservative Party treasurer (without naming him), of sexually abusing a resident at a Welsh children's home in the late 1970s and early 1980s. Entwistle’s resignation came after "Newsnight" was forced to give an unconditional apology to McAlpine.
In his resignation letter, Entwistle accepted responsibility for the lapses and said the unacceptable journalistic standards of the "Newsnight" episode has damaged the BBC's credibility.
"In the light of the fact that the director general is also the editor-in-chief and ultimately responsible for all content," Entwistle said in a statement outside Broadcasting House, "and in the light of the unacceptable journalistic standards of the 'Newsnight' film broadcast on Friday Nov.2, I have decided that the honorable thing to do is to step down from the post of director general.
Entwistle in his defense had said he was not aware of the program before it went on air. Lord McAlpine, who was accused of child abuse by a former resident of the children’s home, was apparently not given a chance to reply to the allegations.
"This is undoubtedly one of the saddest evenings in my time in public life," said Lord Patten, the chairman of the BBC Trust, who oversaw Entwistle's appointment. "At the heart of the BBC is its role as a trusted global news organization. As editor-in-chief, George has very honorably offered his resignation because of the unacceptable mistakes and the unacceptable shoddy journalism, which has caused so much controversy."
The 90-year-old broadcast giant is reeling under a spiraling crisis. Trouble began after the revelations from rival media that Jimmy Savile, BBC’s celebrity news presenter of 1970s and 1980s was a serial child molester, and the same program, "Newsnight," had quashed a report implicating him.
Savile allegedly exploited many girls -- many of them on the premises of BBC -- during his long tenure. "Newsnight" shelved the report and instead ran a tribute to Savile following his death.
Entwistle, who was at the helm when both the incidents happened, is criticized for his inability to take right decisions and lead the organization.
"He showed no sign of being in control the first time (over the Jimmy Savile situation) and this morning's interview on the 'Today' program I think was fatal, because it happened again," Steve Hewlett, a media consultant and former BBC editor, told Reuters.
"You could forgive him for the Savile situation. He could have survived that if he'd shown he was on top of this situation, and he didn't," Hewlett added.
The crisis has damaged the credibility and public trust in the BBC and has raised serious questions on the functioning of the organization, which is funded by a license fees levied on television viewers.
"There are still a lot of questions which need answering. Who did take the decision to approve that program, because quite plainly it was a deeply flawed decision," John Whittingdale, chairman of Parliament's Media Committee told Reuters.