Labor Senator Sam Dastyari has bowed to growing pressure over his links to China, quitting Parliament days before the crucial Bennelong byelection.

Senator Dastyari told a news conference on Tuesday morning that he refused to let his “personal situation” put at risk the chance of Labor winning the next election.

“Today, after much reflection, I’ve decided that the best service I can render to the federal parliamentary Labor Party is to not return to the Senate in 2018,” he said. 

“I’ve not reached this decision lightly, but in my deliberations, I’ve been guided by my Labor values, which tell me that I should leave if my ongoing presence detracts from the pursuit of Labor’s mission.

“It is evident to me we are at that point, so I will spare the party any further distraction.”

Senator Dastyari, 34, has been embroiled in scandal for the past few weeks over his links to the Chinese benefactor Huang Xiangmo.

Pressure had been building on Senator Dastyari to quit after a Fairfax report last month claimed the New South Wales powerbroker gave Mr Huang counter-surveillance advice when he met the billionaire at his Sydney home.

The Turnbull government seized on the report, saying Senator Dastyari had betrayed Australia and demanding he quit Parliament.

A series of damaging leaks followed the Fairfax report, including the suggestion on Monday that Senator Dastyari also pressured Labor’s former foreign affairs spokeswoman Tanya Plibersek to not meet with a Hong Kong pro-democracy activist.

An audio recording was also leaked that revived a 2016 controversy in which Senator Dastyari parroted pro-China talking points one day after Mr Huang threatened to pull a donation from the Labor Party during that year’s election campaign.

The reemergence of that story prompted Labor leader Bill Shorten to sack Senator Dastyari from his position as Labor’s Deputy Whip in the Senate last month. It was the second time he had been dumped from Labor’s leadership team.

Speaking on Tuesday, Senator Dastyari hit back at claims he was not loyal to Australia.

“Reflecting on the events which led to my decision, I leave knowing that I’ve always honoured my parliamentary oath,” he said.

“I’ve always acted with integrity, and I remain a loyal, patriotic Australian.”

The prominent NSW right figure, a former general secretary of the state branch, thanked Mr Shorten for his “patience”, calling the Labor leader “first rate”.

“The Labor Party will have the time to choose my replacement ahead of the Parliament returning next year,” he said.

“I will coordinate the departure with the New South Wales branch. I will continue to be an active grassroots member of the Labor Party.”

In a statement, Mr Shorten said Senator Dastyari had made the “right decision”.

“Following our discussions, Sam Dastyari informed me this morning that he was resigning from the Senate,” he said.

“Sam Dastyari is a good, decent and loyal Australian, and an effective parliamentarian, but his judgement has let him down and now he has paid the heaviest price.”

Senator Dastyari’s announcement comes ahead of Saturday’s crucial byelection in which former NSW Labor premier Kristina Keneally is attempting to pull off an upset in the Sydney seat of Bennelong, which boasts a large Chinese population.

The Iranian-born politician said he would “continue to speak for the millions of Australians who continue to cheer for the great multicultural nation we have become”, and speak against those who “wish to drag us back into an intolerant past”. 

Senator Dastyari has been one of the Opposition’s most prominent critics of One Nation and was recently publicly abused by the far-right Patriot Blue while at a Melbourne pub.