Starmer is under huge pressure, including from MPs in his own Labour Party, over the decision to make Mandelson the United Kingdom's ambassador to Washington DC in December 2024, when his ties to the late US sex offender Jeffrey Epstein were already known.
Files released by the US Justice Department last week included emails highlighting just how close that relationship was, and also suggested Mandelson had leaked government documents to Epstein, and that Epstein had recorded payments to Mandelson or his then-partner, now husband.
"It had been publicly known for some time that Mandelson knew Epstein but none of us knew the depth and the darkness of that relationship," Starmer said at the outset of a speech in southern England.
Mandelson, a government minister when Labour was previously in power more than 15 years ago, quit his position in parliament's upper chamber, the House of Lords, on Tuesday in the face of the uproar over his links to Epstein, and is now under police investigation for alleged misconduct in office.
Emails released by the US Justice Department appeared to indicate that in 2009 Mandelson had sent the financier a government memo about possible UK asset sales and tax changes, and in 2010 gave him advance notice of a European Union 500 billion euro ($A845 billion) bailout package during the bloc's debt crisis.
Andrew Bailey, the governor of the Bank of England, was asked on Thursday how he felt about the apparent leaks, given they came at a time when most officials were working around the clock to stave off economic damage from the financial crash.
"I am shocked by what we're hearing," he said, adding, "How is it that we live in a society in which this happened?"
UK government borrowing costs rose on Thursday as concerns grew over whether Starmer could survive the fallout.
Mandelson has said he does not recall having received payments and has not commented publicly on allegations he leaked documents.
He has not responded to messages seeking comment.
Starmer fired Mandelson last September but his opponents and even those in his own party have said the new revelations posed major questions about the prime minister's judgement.
With polls suggesting Starmer is already hugely unpopular with the UK public, some in his own party say his position is under threat.
Tackling the mounting criticism, he used his speech to angrily condemn Mandelson, saying the latest revelations raised serious questions.
He accused Mandelson of not entering public service because he believed in serving the public good.
"I was lied to, lied to; deceit," he said.
"I understand the anger and frustration among Labour MPs about what has happened ... I actually share that anger and frustration, it was palpable yesterday. I'm not surprised."
Addressing Epstein's victims he said: "I am sorry. Sorry for what was done to you, sorry that so many people with power failed you, sorry for having believed Mandelson's lies and appointing him."
Starmer said he wanted to release the security vetting advice that he was given when he selected Mandelson for the US envoy role but that he needed to abide by a police request not to do anything that could prejudice an investigation.
"However frustrating from my personal point of view that is - and it is - I will not take any step, however politically tempting, however popular, that risks justice for victims."
