The rebellion was further evidence of the unrest in the party at the Prime Minister's alleged appeal to the middle classes at the expense of the core vote - a charge which Mr Blair vehemently denies.
The Commons revolt was led by barrister Robert Marshall-Andrews, the MP for Medway, with a demand to keep legal aid for the disabled and the poor in personal injury cases.
A rebel amendment was defeated by 291 votes to 173 during the report stage debate on the Access to Justice Bill.
Mr Marshall-Andrews said legal aid was a "core" part of the welfare state. The bill would deny it in personal injury cases to children under 18, mental patients, people with substantial disabilities and those receiving income support. "No matter how weak or disabled the plaintiff, no matter how serious the injury, no matter how powerful the wrong-doer, no matter how culpable or deliberate the wrong there will be no legal aid for these people," Mr Marshall-Andrews said.
The Bill removes the right to legal aid for most civil cases making conditional "no win, no fee" agreements with lawyers more common.
For the Tories, Nicholas Hawkins (Surrey Heath) said organisations including the Law Society, the Bar Council and the Child Poverty Action Group formed a "powerful coalition" in favour of keeping Legal Aid for vulnerable people.
But Lord Chancellor's Department minister Keith Vaz assured MPs: "All the groups that you have mentioned will be protected under the policies that we've put forward." Mr Vaz said he did not see any reason why those on income support should not benefit from the conditional fee agreements.
The amendment would extend legal aid to people with disabilities regardless of their means, which was not the current position and should not become the position. "I find it frankly insulting to assume that, simply because a person has a disability, he or she is somewhat less capable of running their own affairs and reaching an agreement with a solicitor than a person without a disability."
Nineteen Labour MPs voted for the amendment. They were: Tony Benn (Chesterfield); Harry Cohen (Leyton and Wanstead); Francis Cook (Stockton N); Jeremy Corbyn (Islington N); John Cryer (Hornchurch); Tam Dalyell (Linlithgow); Denzil Davies (Llanelli); Mark Fisher (Stoke Central); Alan Hurst (Braintree); Dr Lynne Jones (Birmingham, Selly Oak); Ken Livingstone (Brent E); John McDonnell (Hayes and Harlington); Alice Mahon (Halifax); Jim Marshall (Leicester S); Robert Marshall-Andrews (Medway); William Michie (Sheffield Heeley); Dennis Skinner (Bolsover); Llew Smith (Blaenau Gwent); Audrey Wise (Preston). The tellers for the "ayes" were Labour rebels Kelvin Hopkins (Luton N) and Alan Simpson (Nottingham S).