Hartlepool Independent Union has announced it is forming a coalition with Conservative councillors on Hartlepool Borough Council.
The move would see it become the largest group on the council with 11 members - eight Independent Union and three Conservatives.
It comes just hours after Council Leader Councillor Christopher Akers-Belcher and two other fellow Labour councillors resigned from the party.
Following last week's local elections and the latest resignations Labour now has 10 councillors and has announced its new leadership team under Coun Paddy Brown and deputy leader Coun Dave Hunter.
In an announcement today the Independent Union said: "Following successful talks, the Independent Union and Conservatives in Hartlepool will be formally joining under a coalition that we believe is large enough to lead Hartlepool Borough Council."
Independent Union Councillor Shane Moore, leader of the new coalition group said: "With the support of the Conservative Mayor of Tees Valley Ben Houchen we have been able to secure a very positive and promising outlook for the next municipal year.
"Under difficult circumstances and an election result that gave no party overall control, the Independent Union were clear in their opposition to Labour and have struck a deal to force a change of Council Leader.
"This deal makes Hartlepool Council an Independent Union and Conservative coalition."
However, the council remains in No Overall Control as no group has the 17 councillors needed for a majority.
Coun Moore said the group had received interest from some Independent councillors about joining the group but said the situation was still 'fluid'.
Conservative Coun Mike Young, deputy leader of the new coalition group added: "We have a duty to give the people of Hartlepool the kind of council they clearly asked for at the ballot box last week.
"It is imperative that we listen to town residents and begin a process that will allow that change to happen.
"We are excited to work with Independent Union colleagues under coalition and promise to work as hard as ever."