David Cameron's alliance in the European parliament is falling apart after the group's Polish leader left his own party because it was too rightwing and then faced calls from fellow members to step down.

Michał Kaminski, the Polish leader of the European Conservative and Reformists group, announced that he had left Poland's Law and Justice party, Cameron's main ally in Europe, because it had been taken over by extremists.

Fellow MEPs in the alliance have told the Guardian that Kaminski should step down as leader of the ECR because he no longer has a mandate to lead.

The developments are a major embarrassment for the prime minister and William Hague, the foreign secretary. They took the party into an alliance with the Law and Justice party in July 2009.

Kaminski told the Sunday Telegraph :"I cannot accept that my party is being taken over by the far right, and being dominated by the far right. I don't like the direction Law and Justice is going so I'm going my own way now."

Two other MEPs have also indicated they will leave Law and Justice. Others are expected to follow in the wake of local elections in Poland in which Law and Justice came second with 27% of the vote, against 34% for Civic Platform, the governing party.

Kaminski wishes to maintain his role as head of the ECR, but two MEPs from Law and Justice told the Guardian that he ought to leave the post.

Jacek Kurski, a one-time ally of Kaminski's, said he would support a move to ask Kaminski to step aside. "I expect that it will be pointed out to the alliance of parties that something must change following these [Kaminski's] comments." There must be a change to consolidate our group. It is not my responsibility to do that. But I would welcome it," he said.

Kurski also accused Kamiński of "rebranding" himself for European politics. "If there's anybody who is extreme, it is Michał Kamiński. He is doing his best to realign himself but he is the one who made homophobic comments and was once closely connected to the far right in Poland," he said.

Another Polish MEP told the Guardian: "Kamiński will have to go. Otherwise, the alliance will have to be redrawn. He is the worst type of politician because he changes with the wind," he said.

Dr Rafal Pankowski, author of The Populist Radical Right in Poland and an expert in extremist activity, said that the Conservatives could well find that the remaining Law and Justice Party now turned further to the right.

"I agree with Kamiński's description of Law and Justice as going in a far-right direction. Law and Justice had been a very controversial party even before, but now it seems to be moving decidedly to the radical right. It was illustrated on 11 November this year when some of its MPs supported a radical nationalist skinhead march in Warsaw," he said.

The split has provoked fierce infighting within the ECR because Kamiński remains the group's leader, a source of resentment to his former colleagues in Law and Justice, known as PIS in Poland. Kaminski wishes to keep his role as leader of the ECR group.

Senior British Conservatives fear that the turmoil could tear the ECR apart if Kamiński tries to retain control of the ECR and as some Tories take sides in the row between the Polish factions.

The issue is expected to dominate elections for a new Conservative leader in the European parliament next Tuesday.

Martin Callanan, one of the MEPs standing for the leadership of the Conservative MEPs, said: "I have not had a chance to speak to Michał about this. I don't want to say anything. I don't know what's happening."

The prime minister's decision last year to leave the mainstream European People's party to align with Law and Justice provoked controversy and led to the expulsion of a senior Tory MEP who accused the Polish party of harbouring racists and antisemites.

The row is deeply embarrassing to Cameron because if Law and Justice were to leave the Conservative grouping it would fall apart – but keeping the link with the Polish party is now even more sensitive now that Kamiński has described it as "far right".

Edward McMillan-Scott, who is now a Liberal Democrat MEP after being kicked out of the Conservatives for his opposition to the alliance with Law and Justice, said: "I think the whole thing is unravelling. It again highlights Cameron's massive strategic error in abandoning the mainstream for a fragile alliance with extremists."

Kamiński, along with other former Law and Justice MEPs, has now aligned himself with a new political group in Poland comprised of party rebels.

The party was formed last week following growing dissatisfaction within the ranks of Law and Justice ranks over the direction and leadership of Jarosław Kaczyński, the former prime minister and twin brother of President Lech Kaczyński, who was killed in an air crash in Russia in April.

James Holtum, the spokesman for European Conservatives, said: "Law and Justice is still led by Jaroslaw Kaczyński, who was the leader when we joined the group, and it is still a mainstream party in Poland.

"The divisions in Law and Justice are an internal matter, and we don't comment on such things."

At present, the ECR has 54 MEPs. If the number drops below 50 MEPs because of the Law and Justice split, it would severely threaten the group's chances of securing parliamentary committee chairs.

The shadow Europe minister, Wayne David, said: "The Conservatives are in complete disarray in the European Parliament.

"It was inevitable this grouping would begin to fall apart, so it is a very worrying sign of the prime minister's poor judgement that he has failed to act and take the Tories back into the EPP before this point.

"Instead they remain in an isolated group, sitting with in Nick Clegg's words, a 'bunch of nutters [and] homophobes'. Rather than occupying a position of influence, the Conservatives are isolated and irrelevant," he said.