By James Hardy
BBC political correspondent
Patrick Diamond, former special adviser to Peter Mandelson, is not now seeking the Labour nomination for Hartlepool.
Mandelson: Off to Brussels
Mr Diamond, a member of the Downing Street policy directorate, was being championed by Mr Mandelson as Labour's candidate in the by-election.
Labour sources said Mr Diamond's name was not among the 30-odd contenders as the applications deadline passed.
It is understood he was advised by local activists his chances of winning the seat, if selected, were limited.
The Hartlepool party is thought to favour a local candidate - not one parachuted in by Labour headquarters - and two prominent regional union officials have withdrawn for similar reasons.
Mr Diamond, a former special adviser at the Northern Ireland Office, told the Hartlepool Mail: "There has been much speculation throughout the last week.
"I have made many good friends in the Hartlepool Labour Party who urged me to consider putting my name forward.
"However, I decided at the weekend that I would not seek selection on this occasion."
MP Tom Watson, who is masterminding Labour's campaign in Hartlepool, confirmed Mr Diamond was not among the 29.
"He is not standing," the West Bromwich East MP said.
Labour's NEC by-election panel will draw up a shortlist of up to six by Wednesday evening.
The shortlist will be put to a meeting of the constituency Labour Party for a final decision on Friday.
No date has been fixed for the by-election, which is expected in October.
Former senior Cleveland police officer Ray Mallon said last week he would not be standing in the by-election.
Ray Mallon wants to remain mayor of Middlesbrough
Mr Mallon, now the independent mayor of Middlesbrough, said he did not want to give up his current job.
The Labour Party was reported to be considering Mr Mallon, nicknamed "Robocop" for his zero-tolerance approach to crime, as a candidate.
The by-election comes after Mr Mandelson accepted a job as a European commissioner.
Hartlepool has been a Labour constituency for 40 years, but after recent by-election successes some Liberal Democrats hope they could overturn Mr Mandelson's 14,571 majority.
Former television presenter and Euro MP Robert Kilroy-Silk has said he is "seriously considering" standing as a candidate for the UK Independence Party.