OTTAWA - The tenuous unity of federal Liberals will be sorely tested by next year's mayoralty race in Toronto, as the party's national director prepares to throw his hat in the municipal ring.

Rocco Rossi confirmed late Friday that he's tendered his resignation as the party's top administrator and fundraiser, effective Dec. 31, and will announce Monday his intention to seek the mayor's chair in Canada's largest city.

"Running for mayor is something I've been thinking about for the better part of two years," Rossi said in a phone interview with The Canadian Press.

While he's loved his year-long stint as national director of a party he's worked for since he was 11, Rossi pointed out he's been "a Torontonian since I was born."

"I guess this is the call of the blood."

Rossi, 47, was one of the few remaining members of Leader Michael Ignatieff's inner circle left standing after a shake up this fall that was designed to reverse the Liberal party's sharp decline in recent opinion polls.

His candidacy will doubtless garner support from some Ignatieff loyalists.

But other federal Liberals are already backing former Ontario Liberal cabinet minister George Smitherman and yet others, including Warren Kinsella, who is in charge of the federal Liberal war room for the next election, are backing former Ontario Conservative leader John Tory.

"There's no doubt there are a lot of Liberals in Toronto. So yeah, there are going to be some divided loyalties on the ground in Toronto," conceded a senior insider on Ignatieff's team.

Nevertheless, the insider predicted that the mayoral race will get Liberals "pumped up" and in campaign mode and they'll be able to set aside their differences once the mayor is chosen next fall.

"Is there going to be some bad blood between some people? Sure. But at the end of the day, people understand you've got to keep your eye on the prize."

Rossi pointed out that he was campaign manager for Tory during his last run for the mayoralty in 2003. He said Liberals have always considered municipal politics to be non-partisan and have frequently backed a variety of contenders.

He added that he respects both Tory and Smitherman and that each of them brings unique qualities to the mayoral race.

Initially, Ignatieff's office declined to comment on "rumours" of Rossi's departure.

But once the news broke, Ignatieff issued a statement offering Rossi his "most heartfelt thanks for your invaluable service" to the Liberal party.

Ignatieff said that under Rossi, who became national director less than a year ago, the party has "vastly improved" its dismal fundraising, more than tripled its membership and is now "in a solid position to fight the next election, whenever it comes."

He saluted Rossi's "dedication to serving the public good" and his decision to run for mayor.

"Torontonians should be proud to attract talented people such as yourself who want to lead. I wish you the best of luck."

Rossi, who formerly headed up the Ontario Heart and Stroke Foundation, has been credited with turning around the Liberals' dismal fundraising record of recent years. In the first half of 2009, the party raised more money than it did in all of the previous year.

Rossi said he's confident he's not leaving the party in the lurch, that the remaining team at Liberal headquarters "will be able to build on that momentum."

Not all Liberals will be sorry to see him go. Some MPs have griped privately that Rossi, while good at raising money, did not have deep roots in the party or any apparent interest in other aspects of party organization and strategy.

The insider denied there was any bad blood and said Rossi was in no way pushed.

Indeed, Rossi has been touted as a mayoralty candidate for months.