James Murdoch, under fire over his handling of a phone hacking scandal that forced the closure of Britain's top-selling Sunday newspaper, has stepped down from his role at the country's dominant pay-TV company.

The company announced on Tuesday that he would be replaced as chairman by Nicholas Ferguson, the previous deputy chairman. Murdoch remains a member of the BSkyB board.

Murdoch, who was previously chief executive of BSkyB, was dealt a heavy blow in November when more than 40 per cent of the company's independent shareholders failed to back his re-election as chairman.

Since then he has cut his ties with News Corp's British newspaper arm, and moved to the United States to take up
his new role running international pay-TV.

The 39-year-old son of Rupert Mudoch, once seen as heir to his father's company, has also continued to plead his innocence ahead of a parliamentary report investigating the phone hacking scandal, which is expected to be heavily critical of him.

News Corp's British newspaper division, News International, has admitted its News of the World tabloid hacked into the phones of crime victims, war dead and celebrities to generate stories.

It has since shut the 168-year-old paper and settled numerous court cases.