In the latest pair of defeats, peers voted for amendments changing key aspects of the government's controversial proposal to detain terrorist suspects without trial.
The defeats mean a parliamentary clash looms next week when the bill goes to the Commons - where the government intends to try and overturn the defeats - and then returns to the Lords.
Ministers hoped to see the proposals, which are the UK's legislative response to the 11 September attacks, on the statute book by Christmas but that target is now at risk.
A spokesman for Home Secretary David Blunkett said after the defeats: "We feel that the unelected Tory peers are disembowelling vital parts of the bill and completely undermining our fight against terrorism."
He said the distinction peers tried to make between terrorism and crime was "false".
Government warned
But Liberal Democrat home affairs spokesman Simon Hughes told BBC News Online "The House of Lords votes are clear and persuasive majorities from many quarters of the House which the government will ignore at its peril.
"We said we could deliver majorities to defeat the government on several key areas of this bill, we also said that we could take on and reduce the risk of terrorism without losing key civil liberties if the government accepted a bill reduced of its unacceptable elements."
He warned the government would "have its backs against the wall" if it only introduced "fig leaf concessions" next week.
Home Office Minister Lord Rooker, who is steering the bill through the Lords, warned them their proposed changes "taken together, as a group if passed will wreck the bill".
He said it was not always obvious when a piece of information related to terrorist activity, and pointed out that terrorists were often involved in criminal activities such as drug, cigarette and people smuggling.
Terrorists 'underestimated'
The law as drafted by the government would help the authorities detect that kind of activity, he said.
"The idea that those who are 'just criminals' are not connected to terrorism is a misnomer. Therefore we need facilities to look at all the pieces of the jigsaw."
But Conservative peers' leader Lord Strathclyde insisted: "Contrary to the impression given by the government, these amendments do not affect any of the central purposes of the bill.
"They leave the government with exceptional new powers to fight terrorism, which everyone wants."
Key objections
However, they would deny the state the right, which many feared, to commandeer private and personal information on the merest suspicion of a criminal offence unrelated to terrorism, he said.
Lib Dem Lord Phillips of Sudbury said their proposed raft of changes to the bill "goes to the core of our objections" to it.
He warned of widespread fears that the extension of existing powers over disclosure of information to police and other security agencies by public bodies "is not confined to protection of national security".
Both main opposition parties say they do not want the bill as a whole to fail but they do want changes to key parts.