BBC (search) reporter Andrew Gilligan (search) resigned Friday after a judicial inquiry repudiated his reporting that the government "sexed up" intelligence on Iraq -- the third resignation prompted by the harsh criticism.

The controversy has sent a chill through British media, with senior journalists warning it could impede tough investigative reporting.

In a statement, Gilligan apologized for mistakes in his May 2003 story.

"My departure is at my own initiative," he said. "But the BBC collectively has been the victim of a grave injustice."

"I love the BBC and I am resigning because I want to protect it. I accept my part in the crisis which has befallen the organization. But a greater part has been played by the unbalanced judgments" of senior judge Lord Hutton, Gilligan said.

In a statement, the British Broadcasting Corp. confirmed Gilligan's resignation and said it recognized "it is a very difficult time for him."

Hutton was appointed by Prime Minister Tony Blair (search) to investigate the suicide of David Kelly (search), a scientist caught up in the dispute between the government and the BBC about the case for war in Iraq. Hutton said the BBC was wrong when it quoted an anonymous source as saying officials had inflated intelligence to justify war.

Besides Gilligan, the BBC's two top officials -- BBC chairman Gavyn Davies and director general Greg Dyke -- also have resigned; the BBC apologized to the government after the inquiry.

"Adjectives like 'abject' and 'servile' come to mind," said Sir David Attenborough, who held a string of BBC management posts in the 1960s. "It is a sad day when that kind of groveling is required."

On Wednesday, the judge exonerated Blair's government and excoriated the BBC for what he called an "unfounded" report and "defective" editorial procedures.

Dyke said he and other BBC officials were "absolutely shocked" by Hutton's report.

"We were shocked that it was so black and white," he told the GMTV morning television program Friday. "We knew mistakes had been made by us but we didn't believe they were only by us."

Dyke later said the judge had "given the benefit of doubt to every government witness and not to any at the BBC."

Hutton absolved Blair and officials of "sexing up" the September 2002 dossier or mistreating Kelly, who committed suicide in July after he was identified as the source for the BBC's story.

Hutton, whom Blair appointed to investigate Kelly's suicide, said the allegations were "very grave" and faulted BBC editors for failing to review what Gilligan was going to say before he went on the air with the first, and strongest, version of his story.

The reporter broadcast that version just after 6 a.m. without a script, answering an anchor's questions extemporaneously. Crucially, he said officials insisted on including in the dossier a claim -- that Iraq could deploy some chemical and biological weapons on 45 minutes' notice -- that the government "probably knew ... was wrong."

"I attributed this to David Kelly; it was in fact an inference of mine," Gilligan said in his resignation statement.

He told the Hutton inquiry this had been a slip, and that later reports accurately reflected Kelly's assessment that some people in the intelligence services were unhappy about the inclusion of the 45-minute claim because they believed it had not been sufficiently corroborated.

The BBC later faulted Gilligan for "loose use of language."

On Friday, Gilligan stood behind most of his story.

"The government did sex up the dossier, transforming possibilities and probabilities into certainties, removing vital caveats; the 45-minute claim was the `classic example' of this; and many in the intelligence services, including the leading expert in WMD, were unhappy about it," he said.

Dyke said it was important journalists be able to use anonymous inside sources.

"Lord Hutton does seem to suggest that is not enough for a broadcaster or a newspaper ... to simply report what a whistleblower or someone like Dr. Kelly says because they are an authoritative source. You have to demonstrate that it's true," Dyke told BBC radio Friday. "That would change the law in this country."

The publicly funded BBC, whose extensive TV and radio news and entertainment programming gives it a uniquely powerful place in British life, apologized "unreservedly" Thursday for the errors it made in the story. The network said it had to confront "serious defects in the corporation's processes and procedures."

Blair accepted the apology and said it was time for all involved in the bitter row to move on.

"The BBC made mistakes and we have to face up to that," said BBC head of news Richard Sambrook in an e-mail sent Friday to the corporation's 3,500 news staff.

"I believe we must restate our core editorial values, look hard at issues of accountability and transparency, and how to sustain editorial quality across the full range of our programs," he added.

But the Hutton report and Dyke's resignation angered many BBC staff, and alarmed other journalists.

Veteran media commentator Roy Greenslade said the BBC was strong enough to survive.

"The BBC, because it is a principled organization, is eating its heart out over this," he said. "But I don't think in the long run they'll be intimidated.

"There are enough intelligent people at the top of the BBC to ensure they don't lose their way or their morale."