At last year's general election, Chancellor Gordon Brown boasted Labour had lifted 1.2 million children out of poverty.
But household income figures which measure poverty relative to generally rising incomes suggest the real figure is nearer half a million.
Work and Pensions Secretary Alistair Darling insisted the government had met its target to take more than a million children out of "absolute poverty".
Many experts argue it is the figures for relative poverty that are the most important.
But Mr Darling told BBC Radio 4's World At One programme: "The report shows a variety of different ways of measuring progress.
"But if you stand back and look at the overall picture nobody can gainsay the fact that we are making steady and consistent progress."
'More than a mess'
Even more children would have slid into poverty under the Conservatives, added Mr Darling.
But the new government figures and released on Thursday - will still come as a blow to a government that has made tackling child poverty one of its key objectives.
Labour former social security minister Frank Field said: "It is more than a mess, it is deeply disappointing."
He said no previous government had been so committed to eradicating child poverty but the results were a let-down, especially as in the strategy's early years many families were only just below the poverty line.
Mr Field told the BBC ministers should have concentrated less on using means tested benefits and provided more comprehensive income guarantees such as the minimum wage.
'Endless fiddling'
Shadow work and pensions minister David Willetts said: "Today's figures comprehensively demolish Labour's claim to have moved a million children out of poverty.
"And for all their spin and hype, this simply gets the poverty rate back to what it was in 1994/95."
Mr Willetts blamed the government's reliance on over-complicated tax credits, which he said was leading to poor take-up rates.
"Gordon Brown's obsession with endlessly fiddling with the tax and benefits system is the main reason why he can't achieve his own target," he said.
"I sometimes think he is his own worst enemy."
When Labour took power, more than four million UK children lived in officially "poor" households.
Escaping hardship
The government promised to cut that figure by more than a million in its first term.
But the announcement that the pledge had been met was based on a projection.
The figures for actual UK household incomes for the year to spring 2001 show far fewer escaped hardship.
About half a million fewer children were living in households with below 60% of the average income, compared with 1996/97.
Liberal Democrat work and pensions spokesman Steve Webb said Labour had "over-promised and under-delivered" on the issue.
"I think they have had a rude awakening because child poverty is extremely an extremely tough nut to crack," he told Today.
Re-think needed
Mr Webb said initiatives such as the Working Families Tax Credit were having an impact.
But there was a need for a re-think in the way the issue is presented to the public.
New ways of measuring child poverty - such as the number of children who get annual holidays or school trips - should be tried.
"People are not going to march through the streets to call for a reduction in the number of children living in households with below 60% median income," Mr Webb told BBC News Online.