The former Tory cabinet minister described the Scottish referendum as a "matter of political life or death" for the Prime Minister, warning that a successful Yes Vote would leave him looking "weak and ridiculous".
Writing in the Financial Times, Portillo argued that Scottish independence would be a "disaster" for David Cameron and it would "overshadow our economic recovery and with it the Conservative case for re-election."
He went on: "Sneering enemies would join up some dots to draw an unflattering picture. Britain: defeated in Basra and Helmand province, its army and navy cut to scarcely sustainable levels, its economy smaller than in 2007, clinging to an illusory special relationship with the USA and an unmerited seat on the UN Security Council, havering about European membership and now falling apart."
Portillo's warning comes as Scotland's finance sector warned that the £11 billion-a-year industry would suffer a multi-million pound bill to pay for a new financial regulator if Scots vote for independence.
In a dramatic intervention into the Scottish independence debate, Scottish Financial Enterprise said that a Yes vote for independence would lead to extra costs to pay for new regulations.
Owen Kelly, chief executive of the trade body, said: “A yes vote would require the creation of an additional financial regulator with hundreds of staff. The cost would run into millions and have to be paid for by the industry in Scotland."
“Some changes will be necessary if fund managers cease to be in the same legal jurisdiction as the City of London and 90% of their customers."
Adrian Cammidge, head of communications at Edinburgh-based Kames Capital, said: ‘We have a significant majority of customers outside of Scotland and a clear duty of care to ensure they are not disadvantaged by a Yes vote.’
Meanwhile, a new poll found that most English and Welsh people want the United Kingdom to stay together.
In a survey by YouGov for the Sun, 54% of those polled said they wanted Scottish voters to reject independence and stay part of the United Kingdom, while only 24% said they wanted Scotland to break away. Just over one fifth (22%) said they did not know.