Jeremy Corbyn has said "discussions are ongoing" after ex-Labour MP Zarah Sultana announced she was quitting the party to co-lead a new left-wing party with him.
The ex-Labour leader congratulated Sultana on her "principled decision" to leave and said he was "delighted that she will help us build a real alternative".
He said "the democratic foundations of a new kind of political party will soon take shape" but stopped short of providing details as to who would lead it.
Talks have been going on under the radar for some time to turn the small group of independent pro-Gaza MPs, co-ordinated by Corbyn, into an actual political party which could stand candidates at next year's local elections.
But the BBC has been told the question of leadership and the exact timing of the announcement had not been settled when Sultana made her declaration on Thursday evening.
Some of those behind the project wanted a democratic conference to decide the leadership question.
Some Labour MPs on the left of the party have praised Sultana but so far none has said they will be joining the new set up.
Ian Lavery, Labour MP for Blyth, told the BBC's World at One: "Perhaps she thinks she hasn't left the Labour party, but the Labour party has left her.
"People are really fed up of the two party system with regards to Labour and with regards to Conservatives."
"And I think that there is a huge appetite for a left wing alternative to the two mainstream parties."
Responding to Sultana's decision, Home Secretary Yvette Cooper said the MP had "always taken a very different view" from the Labour government on a range of issues.
Defending the government, she pointed to falling NHS waiting times, additional neighbourhood police officers and extending free school meals as examples of "real changes that have a real impact on people's lives".
Sultana, was suspended from the Parliamentary Labour Party last year after she voted against the government and backed a move to scrap the two-child benefit cap but until this week had retained her party membership.
In a post on social media she strongly criticised the government's stance on Gaza and the welfare bill, which was voted on earlier this week.
Corbyn, who was himself suspended from the Labour Party in 2020, did not initially respond to Sultana's announcement or confirm his involvement.
In the statement released on Friday, he wrote: "One year on from the election, this Labour Government has refused to deliver the change people expected and deserved.
"Poverty, inequality and war are not inevitable. Our country needs to change direction, now."
"Congratulations to Zarah Sultana on her principled decision to leave the Labour Party. I am delighted that she will help us build a real alternative.
"The democratic foundations of a new kind of political party will soon take shape. Discussions are ongoing - and I am excited to work alongside all communities to fight for the future people deserve.
"Together, we can create something that is desperately missing from our broken political system: hope."
After being kicked out of the Labour Party, Corbyn successfully stood as an independent candidate in the 2024 general election and has since formed an alliance with four other independent MPs, who share similar views on the Israel-Gaza conflict.