The prospect of the Conservatives being able to form a majority government after the next election have been dealt a damaging blow.
Speaking on Monday afternoon Nick Clegg said the Lib Dems would vote down plans to re-draw the electoral map in revenge for Tory MPs blocking House of Lords reform.
The deputy prime minister conceded that Lib Dem hopes of creating a 400-member 80% elected chamber were dead in the face of opposition from backbench Tories and "short-term political opportunism" from the Labour Party.
"After a long process – almost two and a half years - we do not have the Commons majority needed to ensure this Bill progresses through parliament," he said.
"It is obvious that the Bill’s opponents would now seek to inflict on it a slow death: ensuring Lords reform consumes an unacceptable amount of parliamentary time.
He added: "Clearly, it would be wrong for me to allow parliament to be manipulated in this way not least at a time when there is so much else for us to concentrate on. "
The proposal to create an elected second chamber were dealt a damaging blow last month when 91 Tory MPs rebelled and voted against the Bill.
In exchange for agreeing to drop the legislation, Clegg announced that his MPs would vote down the planned redrawing of the British electoral map that would have cut the number of MPs from 650 to 600.
The review would have likely cost Lib Dems a number of seats at the next election and was also expected to have made it easier for the Tories to achieve a overall Commons majority.
Under the current boundaries the Tories need a double digit lead over Labour to win a majority at the next election.
Clegg said Lords reform was a "fundamental part of the contract" that kept the Conservatives and Lib Dems working together in coalition.
He said: "Coalition works on mutual respect; it is a reciprocal arrangement, a two-way street. So I have told the prime minister that when, in due course, parliament votes on boundary changes for the 2015 election I will be instructing my party to oppose them."
"I cannot permit a situation where Conservative rebels can pick and choose the parts of the contract they like, while Liberal Democrat MPs are bound to the entire agreement."
While the legislation bringing in the boundary changes has already been passed MPs still need to vote to approve the specific changes.
Some angry Lib Dems had warned of "consequences" for the Tories if Lords reform did not get passed. In order for the boundary review to be voted down by parliament Lib Dem ministers as well as backbenchers would need to vote against the measures.
While many Tories will be unhappy at losing the overall electoral advantage the boundary review would have provided, it may come as a relief to some MPs who faced finding themselves without a seat to defend and out of a job in 2015.
Following Clegg's statement Tory backbencher Stewart Jackson said the Lib Dems had "ratted on a solemn promise".
"What is the point of continuing with Coalition other than to keep Cameron in No 10 at any cost?," he said on Twitter.
Peter Facey, the director of the think-tank Unlock Democracy said the ditching of Lords reform was a "shocking example of party politics getting in the way of democracy".
“David Cameron has some serious questions to answer about his ability to lead the country if he can allow himself to be led by the nose in this way," he said.
"Liberal Democrats too should be questioning the purpose of being in a coalition which has so spectacularly failed to deliver any meaningful democratic reform whatsoever."
Lewis Baston, a senior research fellow at the think-tank Democratic Audit said with Labour likely to poll significantly better than its poor showing in 2010, Cameron – new boundaries or not – would need to do the political equivalent of "making water flow uphill anyway" to win the next election outright.
"The cancellation of the boundary changes makes the mountain the Tories have to climb for a majority a bit steeper, but if they are not in any condition to climb any sort of mountain that makes no difference," he told The Huffington Post.
"It will make it easier for Labour and Liberal Democrat MPs with small majorities to see off Conservative challenges and stop them making the 20 net gains they need for an outright win."
But he said some Conservative MPs in marginal seats will also be breathing a secret sigh of relief as when MPs face their first election as an incumbent they tend to much better than the national average.
"Labour’s class of 1997 nearly all survived the 2001 election because when MPs face their first election," he said. "Boundary changes, by altering the relationship between MP and constituency, interfere with this pattern."
"Fighting the next election on the same boundaries as last time will increase the probability that the election will result in another hung parliament, probably with Labour as the largest single party."