Government plans to force all passport applicants to have an ID card have been defeated in the Lords for a third time.
Ministers have been accused of back-door compulsion
Peers voted by a majority of 35 to overturn the proposal, which was backed by MPs earlier this week.
Opposition peers say the plans break the government's promise that ID cards will initially be voluntary.
The Lords insist it should be voluntary for people who apply for new-style biometric passports to have their details entered on a national database.
But Home Secretary Charles Clarke told the House of Commons on Tuesday passports were "voluntary documents" that no-one was forced to renew.
'Risk to freedom'
Conservative Baroness Anelay of St Johns labelled the ID cards scheme "grandiose" and said it "poses a risk to our freedom".
"There are other and better ways of securing our safety, reducing the fraudulent use of services and managing migration," she said.
The government has threatened to use the Parliament Act, which allows it to force through the legislation without the approval of the Lords.
Bringing a constitutional stand-off one step closer, opposition peers challenged the government to use the Act, last invoked in 2000.
The Liberal Democrat leader in the Upper House, Lord McNally, said the House of Lords must retain its right to say "no".
"There is the Parliament Act and that is the right of the elected House to have its way," he said.
"But this House must retain the right to say 'not in our name'."
Earlier, the Labour leader in the Lords urged her colleagues to accept the will of the elected chamber.
Lady Scotland said: "We have now absolutely exhausted ourselves on this issue and I hope we will not have to return to it again."
But the Lords voted to reject the government proposals by 218 to 183.