The House of Lords has defeated government hopes of pushing through plans to abolish the post of lord chancellor and set up a supreme court.
Downing Street is said to be in uncompromising mood
BBC political correspondent James Landale told BBC News 24 what the government's options are.
We are slightly in unchartered territory, this sort of thing hasn't happened for years - the last occasion was in 1975.
Essentially, what will happen is that the government for its part has to decide what it wants to do.
At the moment it is not clear. As we've heard from Baroness Amos, the leader of the government in the House of Lords, it is keeping its powder dry. It is not telling us what it is going to do.
Peter Hain, the leader of the House of Commons, said that if the government did lose the vote, then it would use the Parliament Act.
These are very obscure, slightly complicated legal procedures effectively to force through legislation onto the statute books without the backing of the House of Lords. The government would probably be able to do that in about a year's time or so.
That is a rare step - it has only ever been done six times since the powers were created in 1911 and 1945, so it's a pretty severe step to take.
However, the fact that the government has decided not to announce this immediately means there is a question mark about whether it wants to do that. It is certainly the nuclear option.
What could happen is that the government would say 'we are going to get a new bill, we are going to take this existing bill, the Constitutional Reform Bill, we are going to stick a new name on it, call it the Constitutional Reform Bill number two, introduce it in the Commons and start the process all over again'.
Ministers could then possibly use the Parliament Act while this existing bill, the original one, sits in the House of Lords and disappears off to the select committee.
What technically has got to happen is that the Lords have to decide - they have agreed to send it to committee - what kind of committee, who shall sit on it, who shall choose who shall sit on it, what remit should it have, what powers should it have?
So there's a real old constitutional mess to be untangled here.
What could happen is that the committee could be set up but there could be a compromise on it, there could be a very short time-specific delay on it so the committee is told that it has to sit for two months only, for example.
So the committee could say to the government 'we are not going to delay this bill, you will have time to get it through to the House of Commons for consideration before parliament rises at the end of the session in November'
so a deal could be done in that regard.
At the moment I think that the mood in Downing Street is not one to do deals.
They are very, very frustrated and angry at what goes on in the House of Lords.
They don't like it, they see it as an unnecessary frustration whereas the Lords genuinely say, 'Look, we are trying to do something sensible here, this was rushed legislation, it was drawn up on the back of an envelope back last year as part of the reshuffle'.
So the ball is now in the government's court.