The row follows the publication of a biography of Gordon Brown, written by Paul Routledge, political correspondent of the Independent on Sunday, which revived the bruising leadership battle of 1994.
Allies of the Prime Minister believe that Mr Brown's decision to co- operate with the book showed a lack of judgement, at least by his closest aides.
The Observer quoted a source in Downing Street claiming that there was a "psychological flaw" in Mr Brown, and the paper claimed that the Treasury was responsible for many of the Government's errors.
Downing Street reacted coolly to the newspaper reports last night, dismissing them as "tittle-tattle". The Chancellor's spokesman said: "It is predictable rubbish and wholly ridiculous."
Sources at both Number 10 and Number 11 stressed that there is no evidence that Mr Blair and Mr Brown have actually fallen out. However, the spectacle of the two sides briefing against each other reveals the tensions between rival camps.
Today's Independent on Sunday is likely to add to the furore by making clear that Mr Routledge's controversial book was written with the "full co-operation" of the Chancellor. A letter to the author, which is dated 17 February 1997, says: "Further to our conversation with yourself and my press secretary, Charlie Whelan, this is to confirm that you will have our full co-operation and full access to personal papers."
Mr Brown added that his co-operation was conditional on the book appearing "as soon as possible following Labour's first Budget".
Last week, a row erupted over comments made in the book by the Chief Whip, Nick Brown, who would have been Mr Brown's campaign manager in 1994.Reuse content