The security services expressed concern about the appointment of Lord Mandelson as ambassador to Washington, but No 10 went ahead anyway, Sky News understands.
Downing Street today defended the extensive vetting process which senior civil servants go through in order to get jobs, raising questions about whether or not they missed something or No 10 ignored their advice.
Politics Live: Mandelson sacked as US ambassador following 'new information'
Sky News has been told by two sources that the security services did flag concerns as part of the process.
No 10 did not judge these concerns as enough to stop the ambassadorial appointment.
It is not known whether all of the detail was shared with Prime Minister Sir Keir Starmer personally.
Sky News has been told some members of the security services are unhappy with what has taken place in Downing Street.
Lord Mandelson is close to Sir Keir's chief of staff, Morgan McSweeney, who is known to have been keen on the appointment - and the pair spoke regularly.
No 10 says the security vetting process is all done at a departmental level with no No 10 involvement.
In response to the revelations, shadow minister Alex Burghart posted on social media: "Knives coming out for McSweeney now."
Lord Mandelson was sacked as the UK's ambassador to the US by Sir Keir earlier on Thursday over his ties to disgraced financier Jeffrey Epstein.
The prime minister, who selected Lord Mandelson for the role, made the decision after new emails revealed the Labour peer sent messages of support to Epstein even as he faced jail for sex offences in 2008.
In one particular message, Lord Mandelson had suggested that Epstein's first conviction was wrongful and should be challenged.
The Foreign Office said the emails showed "the depth and extent of Peter Mandelson's relationship with Jeffrey Epstein is materially different from that known at the time of his appointment".
The decision to sack the diplomat was made by the prime minister and Foreign Secretary Yvette Cooper on Thursday morning, Sky News understands.
This was after Sir Keir had reviewed all the new available information last night.
It comes after a string of allegations around the diplomat's relationship with Epstein, which emerged in the media this week, including a 2003 birthday message in which he called the sex offender his "best pal".
Further allegations were then published in The Telegraph on Wednesday morning, suggesting that Lord Mandelson had emailed Epstein to set up business meetings following the latter's conviction for child sex offences in 2008.
Additional emails were then published detailing how the diplomat wrote to Epstein the day before he went to prison in June 2008 to serve time for soliciting sex from a minor. Lord Mandelson said: "I think the world of you."
(c) Sky News 2025: No 10 appointed Mandelson despite security concerns, Sky News understands