Forty-eight Labour rebels are said to have defied the party leadership to vote against the Government's welfare reforms.
Labour rebel Cat Smith said she had voted "alongside 47 colleagues" to oppose the Welfare Reform and Work Bill in the Commons second reading debate.
The scale of the revolt is a blow to interim Labour leader Harriet Harman who urged MPs to abstain as part of her attempt to re-position the party in wake of their general election defeat.
It could have been even bigger if leadership contenders Andy Burnham and Yvette Cooper – who had both criticised the plan - had not indicated that they would support her.
Mr Burnham earlier issued a letter to Labour MPs explaining that he had only decided to do so after Ms Harman tabled a "reasoned amendment" to the Bill which declined to give it a second reading.
"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."
A third leadership contender – Jeremy Corbyn – had indicated that he would be voting with the rebels.
Opening the debate, Work and Pensions Secretary Iain Duncan Smith said the refusal of Labour MPs to accept cuts to the welfare bill showed they had not learned from their defeat.
"It's clear many of the other side still, I don't believe, have actually learnt anything from some of the mistakes made during the 13 years of the Labour government," he said.
"They haven't weaned themselves off the addiction to pay debt and more debt off somebody else's money, and they are still not credible when it comes to managing the public finances."