Peter Mandelson has urged his friend and political ally Tony Blair not to "buckle" under the strain of Iraq.
Mr Mandelson is urging 'less razmatazz'
The European trade commissioner told a fringe meeting at Labour's annual rally the war had become a test of Labour's "staying power" as a government.
People were asking "will our prime minister buckle or will he stand up?," Mr Mandelson said.
Earlier, Labour members forced a vote on "Britain's role in Iraq," which will be debated on Thursday.
Mr Mandelson said: "The battle against international terrorism in Iraq has become a metaphor for this government's strength and will and its staying power."
He said people around the country were seeing the issue this way.
And he added: "This government can and must and will hold up under this pressure" because that was what "Britain expected us to do".
Mr Mandelson was addressing a meeting of the modernising Progress group, on ideas for winning a third term for Labour.
He said Labour "must not and will not" throw away the progress it had made since the 1980s, when it was considered unelectable.
And he hailed the sense of "unity" the party had maintained despite media and opposition pressure over Iraq.
He also warned against complacency and called for a "serious debate about our ideas for the third term".
He said the 2001 election had been "a bit of a breeze" and although a bit of razzmatazz" was necessary to draw attention to policy, the party needed to concentrate on policy.
Alan Milburn, drafted into the cabinet by Mr Blair to take charge of policy planning ahead of next year's expected general election, outlined his "new one-nation politics".
He said Labour had to "reclaim the banner of ambition for our country and aspiration for the individual".
"The job of a progressive politics is not just to beat poverty, it is to help people realise their aspirations," he told the meeting
For example, he added, most people aspired to own their own home and it was Labour's job to help them realise that.
Echoing Mr Mandelson, he said Labour needed to be "more confident about its achievements," adding, "we can fight and win as New Labour, whenever that general election comes".
Health Secretary John Reid spoke about the importance of continuing to renew traditional Labour values.
He said "collectivist" ideals had to incorporate the values of the age of consumerism.
Unless people were treated as individuals they would increasingly seek private health and education services, he told the meeting.