Metronet said it was facing financial uncertainty
Responsible for the upkeep of nine Tube lines, including the Bakerloo, Victoria and Central, Metronet was hired under a private-public financing initiative.
Following a cost over-run, Metronet said it was no longer able to meet its obligations without additional money.
London Mayor Ken Livingstone said the crisis "would not undermine services".
"All trains will continue to run and all stations will remain open," he stressed.
'No funds'
Metronet is not responsible for operating trains with London Underground, which is overseen by Transport for London (TFL), dealing with the day-to-day running of the Tube.
This company has now established that it has no access to such further funds
Metronet
Changing the Tube
London Underground said it had planned for the eventuality of Metronet's collapse, adding that it was vital that planned improvements to the Tube were not delayed too long.
Unions are set to meet Metronet and TFL officials to discuss the crisis on Wednesday.
Ernst & Young has been appointed as administrators and will now take over the running of the business in an effort to put its finances in order.
METRONET LINES Bakerloo, Central, Victoria, Waterloo & City, Circle, District, Metropolitan, Hammersmith & City and East London
Ultimately, Metronet's responsibilities will be transferred to a newly-formed company - although the financial implications of this are as yet unclear.
Metronet has been involved in a long-running dispute with Transport for London about who should pay for the spiralling cost of upgrading the network's infrastructure.
Budget wrangle
Metronet planned to invest £17bn over the next 30 years under the terms of a public-private partnership (PPP) scheme, a method of funding and financing large projects opposed by Mr Livingstone but supported by the government.
But it estimates there will be an overspend of as much as £2bn by 2010.
The financial crisis was triggered by a PPP arbiter's decision earlier this week not to award Metronet about £550m in funding which the firm said it needed to pay for budget over-runs which were out of its control.
Services will not be affected by the financial crisis
Instead, Metronet was awarded an interim £121m payment, a decision which left it unable to meet its running costs.
"Metronet Rail requires additional funding to enable it to carry out its contractual obligations," the firm said in a statement.
"This company has now established that it has no access to such further funds."
Engineering firm Atkins, one of Metronet's shareholders, said the decision to seek administration was "clearly disappointing, while not unexpected".
Metronet's other shareholders are Bombardier, Thames Water, EDF and Balfour Beatty.
"Their company was no longer viable," said London Mayor Ken Livingstone. "It has ceased to exist."
"The shareholders have lost hundreds of millions of pounds," he added.
Tube Lines, the private contractor which maintains the other Underground lines, has not suffered any substantial cost over-runs.
Metronet, a company set up to manage the upgrade of three-quarters of London's tube network, has gone into administration (which is similar to Chapter 11 in the United States) after having accrued debts of up to £2 billion, following the decision on Monday to limit the amount of extra funds that the company would receive from public funds.

A notice on the Metronet website announced that the Boards of both Metronet BCV (responsible for the upgrade of the Bakerloo, Central and Victoria lines) and Metronet SSL (responsible for upgrade of the 'sub-surface' lines) had asked the Mayor to seek the appointment of a PPP Administrator. The statement says that the decision follows a period of 'financial uncertainty', with the decision of the arbiter leaving Metronet "unable to carry out its contract".

Metronet's shareholders, the companies Atkins, Balfour Beatty, Bombardier, EDF Energy and Thames Water had blocked access to an extra funds, and each have a limited liability of £350 million, their original equity stake.

Transport for London have reassured the public that tube services will not be affected - Metronet is not responsible for day-to-day operation - but it is so far unclear what will happen to the upgrade contracts.