British Steel has been placed in compulsory liquidation, putting 5,000 jobs in the UK at risk and endangering 20,000 in the supply chain.
The move follows a breakdown in rescue talks between the government and the company's owner, Greybull.
The Government's Official Receiver has taken control of the company as part of the liquidation process.
Accountancy firm EY has taken on the role of Special Manager, assisting the Receiver.
They have started looking for a buyer for the business. In the meantime, British Steel will continue trading normally.
British Steel has about 5,000 employees. There are 3,000 at Scunthorpe, with another 800 on Teesside and in north-eastern England.
The rest are in France, the Netherlands and various sales offices round the world.
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The Official Receiver said British Steel Ltd had been wound up in the High Court. It said the immediate priority was to continue safe operation of the site.
"I appreciate that this is a difficult time for the company's employees and I want to thank them for their ongoing co-operation," the Receiver said.
"The company in liquidation is continuing to trade and supply its customers while I consider options for the business.
"Staff have been paid and will continue to be employed."
EY said the appointment of the Official Receiver followed "a number of weeks" of negotiations by management with the company's various stakeholders, including lenders, shareholders and the government, to secure the necessary funding to avoid an insolvency.
"Regrettably, these efforts were unable to secure a solution before the company's funding resources were exhausted."
The other companies within the British Steel group are continuing to trade as normal and are not in insolvency.
British Steel's troubles have been linked to a slump in orders from European customers due to uncertainty over the Brexit process.
The firm has also been struggling with the weakness of the pound since the EU referendum in June 2016 and the escalating US-China trade war.
Private equity firm Greybull Capital bought the company for a nominal £1 during the depths of the steel crisis in 2016.
It then rebranded the company as British Steel and recently returned it to profit.
One of its biggest customers is Network Rail, 95% of whose rails are supplied by British Steel's Scunthorpe plant.
In a statement, the rail infrastructure operator said: "Our priority is the safe and reliable running of the railway and we are confident that we will remain able to do this."
It is understood the company has enough stockpiles to keep it going until other suppliers can ramp up production to take up the slack if Scunthorpe stops output.
GMB general secretary Tim Roache said: "This is devastating news for the thousands of workers in Scunthorpe and across the UK.
"Ministers should have been ready to make use of all the options - including nationalisation - in order to save British Steel, but they either don't care or wouldn't take off their ideological blinkers to save hard-working people and communities.
"GMB demands urgent reassurances on what the future holds for the thousands of British Steel workers and their families."
Labour's shadow business secretary, Rebecca Long Bailey, also called for the company to be nationalised.
She said: "The government must act quickly to save this strategically important industry and the livelihoods and communities of those who work in it, by bringing British Steel into public ownership.''