Forty-eight Labour rebels have defied the party leadership to vote against the Government's welfare reforms.
Leadership contender Jeremy Corbyn was among the MPs to ignore interim leader Harriet Harman's call for them to abstain in the Commons second reading vote on the Welfare Reform and Work Bill.
The scale of the rebellion could have been even greater if two other of the leadership hopefuls Andy Burnham and Yvette Cooper - who had both criticised Ms Harman over the plan - had not fallen into line.
In senior Labour circles, there was relief that no shadow ministers had joined the revolt, but the Tories said it showed Labour had not learned from their general election defeat.
Mr Burnham meanwhile made clear that he could continue to lead the fight against the Government's plans if he gained the leadership.
A Labour Party spokesman sought to play down the rebellion insisting that it was "no big surprise".
"Harriet was clear in the position - that we would abstain - and the majority of Labour MPs did so. However, we always knew that there would be a certain number of people who took a different view," the spokesman said.
However Work and Pensions Secretary Iain Duncan Smith said that with around a fifth of the parliamentary party voting against the reforms, it was clear Labour had not changed.
"Nearly 50 Labour MPs have defied their leadership and opposed our welfare reforms which will move our country from a low wage, high tax and high welfare economy to a higher wage, lower tax and lower welfare society," he said.
"It's clear that Labour are still the same old anti-worker party - just offering more welfare, more borrowing and more taxes."
Ms Harman had hoped to use the issue to show that the party had listened to voters' concerns about the high cost of welfare to the taxpayer, but the more triggered a furious reaction across the party.
Earlier Mr Burnham issued a letter to Labour MPs explaining why he had decided to vote with the leadership after Ms Harman tabled a "reasoned amendment" which would have denied the Bill a second reading, although he remained deeply unhappy with the legislation.
"Collective responsibility is important and it is what I would expect as leader of our party. It is why I will be voting for our reasoned amendment and, if it is defeated, abstaining on the Bill," he said.
"But I can reassure you that this is only the beginning of a major fight with the Tories. I am determined that we will fight this regressive Bill line by line, word by word in Committee.
"If the Government do not make the major changes during committee stage, then, as leader, I will oppose this Bill at third reading."
SNP employment spokeswoman Hannah Bardell said Labour would pay the price for refusing to oppose the Bill at next year's elections to the Scottish parliament.
" "Labour had the perfect opportunity to join the SNP in a progressive coalition to oppose the Tories - but with some honourable exceptions they sat on their hands," she said.
"This disgraceful stance will haunt Labour through next year's Scottish Parliament election and far beyond."
The Bill was given a second reading by 308 to 124, a Government majority of 184.