US President Donald Trump said the BBC "defrauded the public" and that he had an "obligation" to take legal action over the editing of a speech.
BBC Director-general Tim Davie and head of news Deborah Turness resigned on Sunday amid a scandal over the editing of a speech by Mr Trump before the attack on the US Capitol on 6 January 2021.
Mr Trump reiterated his threat of launching a billion-dollar legal action during an interview on Fox News.
He said: "I think I have an obligation to do it, you can't allow people to do that.
"I guess I have to. They defrauded the public and they’ve admitted it. This is within one of our great allies, supposedly our great ally.
"That’s a pretty sad event. They actually changed my January 6 speech, which was a beautiful speech, which was a very calming speech, and they made it sound radical.
"They showed me the results of how they butchered it up. It was very dishonest and the head man quit and a lot of the other people quit."
Watch: Donald Trump tells Fox News he has an 'obligation' to sue the BBC
A legal letter, from Trump counsel Alejandro Brito, has demanded that "false, defamatory, disparaging, and inflammatory statements" made about Mr Trump be retracted immediately.
The letter says if the BBC "does not comply", Mr Trump will be "left with no alternative but to enforce his legal and equitable rights, all of which are expressly reserved and are not waived, including by filing legal action for no less than 1,000,000,000 dollars in damages".
UK Prime Minister Keir Starmer said a strong and independent BBC was needed in a time of disinformation but he said the broadcaster must get its "house in order".
He was asked in the House of Commons if he would tell the US president to drop his lawsuit threat.
"Let me be clear, I believe in a strong and independent BBC," he said. "Some would rather the BBC didn't exist. Some of them are sitting up there," he said, pointing to opposition MPs.
"I'm not one of them. In an age of disinformation, the argument for impartial British news service is stronger than ever. And where mistakes are made, they do need to get their house in order, and the BBC must uphold the highest standards, be accountable and correct errors quickly. But I will always stand up for a strong, independent BBC."
Britain's Culture Secretary Lisa Nandy has said the BBC must "renew its mission for the modern age" and warned MPs attacking the broadcaster to "consider just what is at stake".
The once-a-decade process of reviewing the broadcaster’s charter will begin shortly, with Ms Nandy saying it would ensure a BBC which is "fiercely independent" and "genuinely accountable" to the public it serves.
She told the Commons: "There is a fundamental difference between raising serious concerns over editorial failings and members of this House launching a sustained attack on the institution itself, because the BBC is not just a broadcaster, it is a national institution that belongs to us all."
The BBC’s charter expires at the end of 2027 and the process of reviewing it is now set to begin with the organisation at the centre of a storm following the resignations of Mr Davie and Ms Turness.
Ms Nandy said the charter review process will begin imminently, telling MPs: "Together, we will ensure the BBC is sustainably funded, commands the public’s trust and continues to drive growth, good jobs, skills and creativity across every region and nation of the UK.
"In an era in which trust is fraying and truth is contested across our nation, it will ensure the BBC remains fiercely independent and is genuinely accountable to the public it serves."
Amid the debate over the public broadcaster’s impartiality, several Labour backbenchers called on Ms Nandy to remove Robbie Gibb, a former political adviser to Theresa May when she was prime minister, from the BBC Board.
Answering a question from Labour MP Sarah Owen, Ms Nandy said: "The charter sets a strict legal threshold that must be met before dismissal of a board member, and so I am unable to pursue the course of action that she suggests."
Mr Davie told BBC staff the corporation has to "stand up for our journalism", insisting it will control its own narrative which "will not just be given by our enemies".
In remarks to BBC staff he said: "We are a unique and precious organisation, and I see the free press under pressure, I see the weaponisation. I think we’ve got to fight for our journalism.
"I’m really proud of our work, and the amazing work locally, globally, that we’re doing is utterly precious."
He added: "We have made some mistakes that have cost us, but we need to fight for that.
"And I’m fiercely proud of that, and don’t let anyone stop you from thinking that we are doing a fantastic job."
Additional reporting Reuters
