Abandoned plans to force visitors from "high risk" countries to pay a security bond to enter the UK were the brainchild of Nick Clegg, David Cameron has told business leaders.
A Home Office scheme - which had been due to be piloted from this month to deter visitors from overstaying - was dropped due to a lack of support from Liberal Democrats and other Whitehall departments.
Lib Dem sources said Home Secretary Theresa May's version of the policy was "not acceptable" to the party and not supported by other departments.
"They have seen the writing on the wall and binned it off. We have been clear from the start that the version was just not acceptable to us," they said.
The Prime Minister confirmed that the policy had been dropped when he was asked about it at the CBI annual conference in central London - but he made clear where he thought the blame lay for its initial development.
"This was an idea that the Deputy Prime Minister first proposed but we are not proposing to go ahead with it," he said.
To laughs, he joked: "He has lots of good ideas but this one is not one we are going ahead with."
It had been suggested that visitors from India, Pakistan, Sri Lanka, Bangladesh, Ghana and Nigeria would be required to pay the deposit for a six-month visa - but it is believed the scheme had little backing.
Earlier this year, the scheme was condemned as "highly discriminatory" by Indian business leaders and Mr Clegg indicated that he would block the plans if they were applied in an "indiscriminate way".
A spokesman for the Deputy Prime Minister said: "There were very different interpretations of how this policy was going to work.
"Nick Clegg and the Liberal Democrats thought they could serve as an additional tool and safeguard for immigration officers when making borderline decisions.
"By contrast, the Home Office wanted it as an additional requirement on a much wider range of legal migrants.
"The Deputy Prime Minister, other Whitehall departments and a multitude of voices outside Government all expressed opposition to the Home Office's version of the policy.
"Ultimately, Liberal Democrats in Government were clear that we would not agree to the Home Office's version of the policy. As a result, they have dropped it."