Police are now investigating and the under-fire-mayor said: "I have never done it before. I was drunk. I don't know what it was I was putting up my nose. It could have been sherbet for all I know."
The one minute seven second video shows the Mayor entering a toilet cubicle with an unnamed man.
Mr Rix then says: "Listen, right, shut the door. Don't want anyone f*****g looking in. Don't want anyone seeing Cllr Rix doing this".
His male companion can be heard encouraging him shortly after he opens a bag as Cllr Rix rolls up a bank note.
The man then says: "Yeah, go on," and then adds: "You do the big one."
Cllr Rix then asks him: "Are you sure?" To which the other man replies "yeah, go on."
The Mayor then crouches over the cistern and appears to slowly snort the white powder.
Today he insisted he would not step down as mayor of Dover.
He said: "I just feel I have let down my family but I will get over it. I have had a lot of support from friends and family, people that know me."
He said he was not a drug user, insisting he was "dead against" drug taking, and he was not sure what type of substance he snorted or where it was filmed.
He admitted it was him in the footage but insisted it was not a resigning issue.
Asked whether he would be quitting, he said: "No, I'm not at all. I'm not standing down."
As the footage was leaked online Mr Rix told the Dover Express: "I had never done this before in my life. I had been set up right from the start.
"This was from before I was mayor, and even deputy mayor. I hadn't long been a councillor.
"I know I shouldn't have done it - I was drunk, and that was it. I can only apologise to my friends and family for putting them through it".
He later told Kent Online: "It did not happen recently. I was set up, pushed into it and coerced.
"Someone had put drugs into my beer and I did not know I was being filmed." It is currently unclear where the video was shot.
Late today, a Dover Town Council spokesman said: "We are taking this matter very seriously and have asked the Kent Association of Local Councils for advice.
"The Mayor has agreed to self-refer to the district council's Monitoring Officer for a possible breach of the Code of Conduct.
"There may be a criminal investigation, but this is a matter for the police."
Neighbours of Cllr Rix said they were "not surprised" he had been filmed appearing to snort a white powder from a toilet.
This morning he left his hilltop Dover home at around 7am, claiming again that he was a victim of blackmail.
His heavily-modified home boasts stained-glass windows depicting gypsy carriages and a huge garage extension.
One neighbour said: "That doesn't surprise me in the slightest".
Kent Police have confirmed the force is looking into the circumstances of the footage, which was posted on YouTube and has already received more than 6,000 views.
A spokesman said: "Kent Police is aware of media coverage of a video circulating online reportedly relating to drug use.
"Officers will be making enquiries to establish the circumstances of the footage."
But on the allegation Cllr Rix was being blackmailed Kent Police said data protection laws prevent them to confirming if this was the case.
Dover town councillor Andrew Richardson, leader of the Ukip group, said that unless the mayor can explain his actions he should resign.
He said: "If someone is in the position of mayor then he owes the people of the town a certain level of standards of behaviour.
"So if he can't provide an explanation for the video that doesn't involve him taking an illegal substance he should resign as his position would be untenable.
Fellow town councillor of Labour, Gordon Cowan, said that Cllr Rix should consider his position as mayor and town councillor.
He said: "The big question is do the people of Dover want someone representing them under these circumstances. He should take a serious look at his position."
When he became Mayor in April he said: "I want to bring Dover on a bit and try and make everyone work together and make Dover a better place - that's the idea of it all."
Dover Town Council says the role of Mayor is "respected and held in high regard by the community because of its service to the community and the dignified behaviour of successive Mayors and Deputy Mayors."
In a statement it said: "We are aware of a video being posted on YouTube of Neil Rix, town mayor of Dover.
"The video and the circumstances in which it has been posted are ambiguous. We will not allow the current speculation to stand in the way of the work of the mayor and Dover Town Council."
Dover born Cllr Rix, one of 11 siblings, also runs a demolition and skip hire company in Kent, and has been an independent councillor for several years.
Speaking in June he said he voted to leave the EU.
He said: "I voted to leave and now I'm looking forward to the future.
"I don't think it's all going to be doom and gloom like they say. I think the future's bright ahead.
"I don't like being governed by someone in a different country. My dad fought the war for an independent Britain and I want to put the great back into Britain."
