Trade Secretary Patricia Hewitt and Tony Woodley, head of the T&G union, both said the news was "devastating".
The administrators for the bankrupt firm announced the figure at a press conference this afternoon. Job losses will start immediately.
"Overall, we expect there to be just under 5,000 employees made redundant. We are still trying to finalise the exact numbers," PwC announced at MG Rover’s Longbridge plant.
About 400 workers would be retained at engine-maker Powertrain but the position of the company was still under evaluation.
Also this afternoon, Prime Minister Tony Blair announced that a support package would be put in place for MG Rover staff.
Under pressure from factory employees, Blair stated on BBC Radio2’s The Jeremy Vine Show: “I don’t want to lead workers astray with false promises.”
PwC will now look to sell off MG Rover's assets although some industry sources have said there is little of value left.
Hewitt told the BBC the Government had done everything it possibly could.
Recent talks had focused on trying to persuade the Chinese firm that it was worth looking at all or part of Longbridge as a going concern.
But, after the original deal failed, unions had described the chances of stitching together a new rescue as "a million in one".
“Shanghai Automotive had been put off by the sheer scale of losses and financial liabilities the company is carrying and would go on carrying before any new models would come on stream", says Hewitt.
Some of the suppliers owed a total of about £200m by MG Rover are holding a meeting on Friday to discuss what happens next.
The Birmingham Chamber of Commerce & Industry (BCI) said about 400 suppliers in the area had been affected by MG Rover's move into administration.
The industry estimate of the amount owed by MG Rover to suppliers was made after the BCI said 25 firms had indicated they were owed £9m by the company.
BCI chief executive Sue Battle said the Government and banks could help suppliers with VAT and tax holidays.
The BCI is now lobbying for an immediate refund of VAT on MG Rover's bad debts.
"There is no clear picture about what stock is paid for and who owns it.
"This needs clarification by the administrator so that suppliers can recover their property or at least know the extent of the bad debt." A Government task force set up to help MG Rover suppliers has so far made payouts of £156,000 to 26 firms.