Bill Morris, leader of the Transport and General Workers' Union, put down a clear marker to Mr Blair that the trade union Left would not abandon the political goal of state ownership.
Mr Blair made it clear he believes that reform of Clause IV of the party's constitution - committing it to nationalisation - is essential if the Opposition is to win the next election.
In a comment that comes close to making Clause IV an issue of confidence, Mr Blair will say in a speech this week that Labour has "to decide whether it is a modern progressive party for the 21st century or a pressure group for worthy causes in opposition''.
The dispute followed a speech by Mr Morris who told motor industry union members in Birmingham yesterday that "above all, our bottom line has always been, and continues to be, a clear and unequivocal commitment to public ownership and social justice".
Mr Morris said transport workers - like the British people as a whole - would like to see railways kept in the public sector, or returned there by Labour if the Tory privatisation proposals are realised.
More controversially, the TGWU, which commands around 10 per cent of the votes at the special party conference on Clause IV in London on 29 April, also wants "the vital natural asset of water" brought back into public ownership.
In a speech this week, Robin Cook, shadow foreign secretary, will list social justice, an opportunity economy, a strong public sector, democracy, equality, and a healthy environment as key components for Labour's programme. Mr Cook will argue that Labour's ideology rests not on state ownership as the sole objective of socialism but on social solidarity.
Labour movement insiders said Mr Blair's position is "fragile, because it depends on doing deals with union barons. There isn't time to have secret ballots of members or to allow trade union conferences to decide.''
The unions still hold 70 per cent of the votes at party conference, and although they can vote individually, it is much more likely that they will vote en bloc, as they have always done.