Tony Blair was accused of refusing to relinquish his powers of patronage last night when he announced a body to propose and vet new peers.
The Government promised its new Appointments Commission would be more open and transparent, but Conservatives complained it would still leave the Prime Minister in charge.
The search for independent members for the seven-member commission is being helped by the headhunters PricewaterhouseCoopers, but opposition parties said tougher arrangements proposed by a Royal Commission had been shelved indefinitely.
"This is a smokescreen," the leader of the Conservatives in the House of Lords, Lord Strathclyde, told The Independent. "The Prime Minister appoints the majority of members of the commission and its chairman. He will continue to decide the size of the House and he will continue to decide the number of peers each party gets."
The Conservatives called for the implementation of the Royal Commission's proposal for a statutory commission set up by the House of Lords. Other opposition groups said the only way forward was a fully elected second chamber.
In a statement, Mr Blair suggested the commission, which would be chaired by the crossbench peer Lord Stevenson of Coddenham, had been set up as an interim measure until the reform of the House of Lords was completed. The commission would choose non-party crossbench peers and would also vet political nominees to ensure nobody could buy a peerage, he said.
The commission will have three independent members in addition to its chairman. They will be Angela Sarkis, chief executive of the Church Urban Fund; Dame Deirdre Hine, former Chief Medical Officer at the Welsh Office, and Felicity Huston, chairman of the Northern Ireland consumer committee for electricity.
Lord Stevenson is the chairman of Pearson Plc and Halifax Plc, and was appointed a crossbench peer in 1999.
The body will also have one representative from each of the three main parties, two of whom sat on the old Political Honours Scrutiny Committee. Baroness Dean of Thornton-le-Fylde, a Labour peer, and Lord Hurd of Westwell, a former home secretary and foreign secretary for the Conservatives, will be joined by Lord Dholakia, a Liberal Democrat.
The Leader of the House of Lords, Baroness Jay of Paddington, said yesterday's move was "an interim commission for an interim House of Lords. This is an important step in the process of delivering the Prime Minister's promise to give up his sole power of patronage. No Prime Minister before has ever taken this step."
Under the new system, political parties will continue to nominate their own peers, who will be vetted by the commission and appointed by the Queen. Crossbench peerages will be nominated by the commission and appointed by the Queen.
The Prime Minister will be able to veto peerages only if there are national security implications, but he will continue to rule on the numbers of peers appointed to each party and to the cross benches.
Campaigning groups argued that the only way forward was a fully elected second chamber. Chris Lawrence-Pietroni, head of campaigns for Charter 88, said that was what the majority of the public wanted. "It should not be for the government to decide who sits in the second chamber," he said. "Accountability is a fundamental part of a modern democracy."
Some Conservatives questioned the independence of Lord Stevenson, who is a longstanding friend of Peter Mandelson, the Secretary of State for Northern Ireland.
Andrew Tyrie, MP for Chichester, said: "He looks a bit too close to the Blair presidency for comfort."