Ms Smith is the government's chief whip
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Labour MPs have agreed to give the government whip the power to suspend colleagues who defy the party line.
The 'yellow card' gives Jacqui Smith an option between a verbal reprimand and total withdrawal of the whip.
If suspended an MP would lose their privileges and access to meetings of the Parliamentary Labour Party (PLP).
But they would still be expected to vote with the government. Labour MP Ian Austin said many of his colleagues in the PLP were fed up with the rebels.
"It's an important victory for Jacqui Smith, who has only been in the post for a couple of months, but who showed real leadership this evening," he said.
"I am pleased she listened to the views of the majority of the PLP, which is that Labour MPs are fed up with the small numbers of colleagues who enjoy often profitable media attention, openly criticising their Labour colleagues and government.
"This has to stop and the chief whip's 'yellow card' step... is a reasonable and proportionate way of dealing with discipline in the party."
But colleague Diane Abbott accused Ms Smith of "driving a coach and horses through the rights of MPs" in an attempt to "close down dissent".
Writing in the Times, she said only the Speaker had the right to suspend MPs.
She added: "In no other Western democracy would the executive be allowed to interfere with the rights and privileges of the legislature in this way."