The embattled police chief of Ferguson, Missouri, is to resign a week after his department was accused of racial bias in a scathing report by the US government, he announced on Wednesday.

Thomas Jackson told colleagues in a resignation letter that “with profound sadness” he would quit as police chief effective 19 March.

“It has been an honor and a privilege to serve this great city and to serve with all of you,” said Jackson. “I will continue to assist the city in any way I can in my capacity as private citizen.”

Jackson, 58, is the sixth senior Ferguson official to lose his job since the Department of Justice last week sharply criticised the city’s criminal justice system. Investigators concluded police and court authorities targeted black people disproportionately and frequently violated their constitutional rights.

James Knowles III, mayor of Ferguson, said on Wednesday evening he would not resign. “Somebody is going to have to be here to run the ship,” he said at a press conference. “I realise there are people that still want a head, or my head or other heads, but we’re focused on how we can move this community forward.”

Amid persistent suggestions that the city’s police force could be shut down, Knowles said Ferguson was “committed to keeping our police department”.

I realise there are people that still want a head, or my head or other heads James Knowles III

The mayor said Jackson would receive a year’s salary in severance pay. The chief was paid $95,512 (£64,000) a year, according to figures previously released by the city. Knowles also said the city manager, John Shaw, whose departure was announced on Tuesday, would receive his full $120,000 salary as severance.

Al Eickhoff, currently a lieutenant colonel, is to become acting police chief while city authorities carry out a a nationwide search for a permanent replacement, said Knowles.

The resignation of Jackson has long been expected. He was heavily criticised for his handling of the furore over a white police officer’s fatal shooting of a black 18-year-old in Ferguson last year.

Residents were appalled that Jackson’s officers left the body of Michael Brown lying for more than four hours in the residential side street where he had been shot dead by Darren Wilson on 9 August. Successive nights of protests followed Brown’s death.

Jackson eventually apologise to Brown’s family in a video message. “It was just too long, and I am truly sorry,” he said of the time Brown’s body was left in the street. The chief was also criticised for announcing at the same time as he unveiled Wilson’s long-awaited name that Brown had been caught robbing a convenience store in the minutes before he was killed.

Eickhoff, a 58-year-old assistant chief, joined the department only five days before Brown’s death, according to city records. He previously worked in Creve Coeur, Missouri, where he was honoured in 2013 for spotting a man who was having a stroke.

Jackson’s resignation was welcomed by protest groups and lawmakers critical of Jackson’s leadership. “This is long overdue,” said Antonio French, a St Louis alderman. “There were grounds to fire or ask for the resignation of Chief Jackson months ago.

“But the details in the Department of Justice’s report of how his department operated meant there was no way for him to remain in that position if the city is to move forward.”

Spokespeople for the city of Ferguson did not respond to repeated requests for comment. Reached by telephone, Jackson’s daughter declined to comment when asked to confirm that her father was planning to resign.

The departure of Shaw followed the resignation of municipal court judge Ronald J Brockmeyer, Brockmeyer’s court clerk, and two of Jackson’s senior commanders.

Knowles said new leadership would carry out reforms. “The city of Ferguson looks to become an example of how a community can move forward in the face of adversity,” he told the press conference at city hall.

Jackson presided over a police force that was 94% white in a St Louis suburb whose population is two-thirds black. African American residents reported feeling alienated from the officers who aggressively policed their driving and daily lives. The Justice Department’s report blamed the community disintegration on the city’s policy of raising revenue through small court fines.

The police chief was named along with Shaw and Brockmeyer as one of the driving forces behind the revenue-generation policy.

Investigators found an email from Jackson to Shaw in March 2011 reporting that court revenue in the previous month was $179,862.50, which “beat our next biggest month in the last four years by over $17,000.” The city manager replied: “Wonderful!”

Racist emails unearthed by the federal investigators prompted the resignations of veteran officers Sergeant William Mudd and Captain Rick Henke, who was effectively Jackson’s second-in-command, and the firing of Mary Ann Twitty, the city’s court clerk.

Jackson joined Ferguson’s police department as chief in March 2010. He lives in the neighbouring town of Florissant with his wife Patricia and has a pilot’s licence, according to public records.