Police: We have the Toronto mayor drugs video
Toronto police say they have recovered a mobile-phone video appearing to show Mayor Rob Ford smoking from a crack pipe.
The saga has captivated the city since reports surfaced in May of the existence of the video.
The video, first brought to light by journalists who reported seeing it, has never been released publicly.
Mr Ford, who has denied using crack cocaine, has refused to resign.
"I wish I could come out and defend myself," he told a gaggle of reporters outside his office on Thursday following the police statement on the video.
"Unfortunately I can't because it's before the courts, and that's all I can say right now... I have no reason to resign," he said.
Earlier, Toronto Police Chief Bill Blair told media of the video they had recovered from a computer hard drive, the contents of which he said were consistent with previous media descriptions.
Police have not filed criminal charges against Mayor Ford in connection with the video.
"There is nothing on that video that would support the laying of criminal charges," Mr Blair said. But he added it was an "issue of significant public concern and... a problem for the city".
He said he was "disappointed" by the video's contents.
In May the Toronto Star newspaper said it had been approached by drug dealers trying to sell the video; two of its reporters viewed the video, but the organisation declined to pay for it.
A Gawker journalist also reported seeing the video and the organisation raised more than $200,000 in an online campaign to buy it, before being told by a source the video was "gone".
A photo depicting Mr Ford with two young men, which Gawker said they were given by the drug dealer selling the video, became notorious when it emerged that one of the men, Anthony Smith, had been shot dead on a Toronto street. Two men are facing murder charges in that case.
Reports of the mystery video's existence triggered a massive police investigation into the mayor and his associates, specifically a friend and occasional driver named Alexander "Sandro" Lisi.
Mr Lisi has since been charged with marijuana trafficking and possession. Police said on Thursday that he now faced a charge of extortion in relation to the video.
Documents released on Thursday also revealed a lengthy police surveillance operation against Mr Ford, with officers going through his rubbish and monitoring late-night meetings between Mr Ford and Mr Lisi.
The documents were released by court order on Thursday after petitioning by leading Canadian media outlets.
Several of Mr Ford's aides have resigned and his chief of staff was sacked in recent months. Some were interviewed by police in the case.
The case has riveted the city and its suburbs of just under six million people, Canada's largest. Mr Ford and his brother Doug, also a city councillor, have become divisive figures.
Mr Ford was elected in 2010 on a tough economic platform in which he promised to rein in spending and end the influence of special-interest groups.
His term in office has been plagued with allegations of substance abuse and regular confrontations with media, whom he accuses of organising a witch-hunt. He also narrowly escaped being removed from office in a conflict of interest case.
But he has drawn public sympathy with his folksy image and a very public battle with his weight.
Before Thursday's revelations, Mr Ford had pledged to run for re-election next year. He refused to comment to reporters at his home early on Thursday.