The Labour party has formally endorsed Dan Jarvis’s candidacy to be the mayor of the Sheffield city region, agreeing to allow him to stay on as an MP if he is elected in May.

The MP for Barnsley Central was chosen last month by 58% of party members in Sheffield, Rotherham, Barnsley and Doncaster to be their candidate in the race.

Three days before his selection, the party’s national executive committee had ruled that Jarvis would not be able to stay on as an MP if he was elected, a move described by Labour MPs in Yorkshire as “unfair and undemocratic”.

However, Labour announced on Tuesday that it was formally backing Jarvis’s candidacy and a party source said he would be allowed to keep his seat in parliament if elected as Sheffield city region mayor.

Responding to the decision, Jarvis said: “I am honoured to be Labour’s candidate for the Sheffield city region mayoral election and I am looking forward to the campaign.

“This is an important role at a crucial moment and we must ensure that we elect a Labour mayor who will deliver a bold and radical plan for delivering real change for the people of South Yorkshire.”

The role of Sheffield city region mayor comes with no agreed powers and Jarvis has said he will not take a salary in the role. He has pledged to use his position in Westminster to fight for an interim Sheffield city region deal, with a view to eventually joining a devolution agreement for the whole of the county of Yorkshire.

Eighteen out of 20 Yorkshire authorities have backed proposals for a One Yorkshire devolution deal, with only Sheffield and Rotherham opting to prioritise a deal for south Yorkshire.

Supporters of the Labour leader, Jeremy Corbyn, on the NEC were criticised locally as “picking an unnecessary fight” with Jarvis after their initial ruling, but the body claimed it was merely formalising a pre-existing convention. Both Andy Burnham, the mayor of Greater Manchester, and Steve Rotherham, the mayor of the Liverpool city region, stood down as MPs when they were elected to their positions.

Speaking to the Guardian after announcing his candidacy in February, Jarvis said there were many examples of politicians performing multiple roles, pointing to MPs who chair select committees or hold ministerial briefs.

Jarvis is the overwhelming favourite to win the mayoral contest in the region as all of the 14 South Yorkshire constituencies that will take part in the election were won by Labour at the last general election. Nominations for candidates for the 3 May election close on Friday 6 April.