The allegation was included in a dossier of alleged human rights abuses in Iraq published by the Foreign Office on Monday.
But veteran Labour backbencher Tam Dalyell has accused Tony Blair of being "cavalier with the truth" over the allegation.
According to the government's dossier, Saddam Hussein's son Udayy ordered the national football team to be caned on the soles of their feet after losing a World Cup qualifying match.
But Mr Dalyell said a probe by football's governing body Fifa found no evidence to back up the allegation.
Mr Blair appeared to concede the point, made during angry exchanges at Prime Minister's Question Time, but insisted it was not important.
"There may be a disagreement between Fifa and the government or the Iraqi authorities but I ask you to focus on the human rights abuses in Iraq that are beyond any doubt at all," he told MPs.
"Frankly the Iraqi football team may be one matter, but these human rights abuses are self-evident and when you talk to people who have lived through the regime of Saddam Hussein then I don't believe anyone can dispute it is an appalling, brutal and terrible regime."
'Inconsistencies'
But Downing Street later said statements from players who had escaped Iraq after the Fifa probe backed up the allegations.
Mr Blair's official spokesman added: "We would not have put this in a report if we did not think this was true."
Mr Dalyell stood by his story, however, and said the government was in danger of undermining its own case.
"Prime Ministers should not be cavalier with the truth.
"Small inconsistencies can reveal larger inconsistencies.
"Small lies are often part of larger lies," he said.
'Cynical'
Mr Dalyell said he was not saying Iraq was "not a cruel regime, like Saudi Arabia and many other places in the Middle East".
But he added: "The timing of the document is so cynical as to suggest it is simply a device to soften up the British nation for going to war against a demon figure."
The controversy came as Foreign Secretary Jack Straw issued a direct warning to Saddam Hussein to "come clean" over weapons of mass destruction, through Arab satellite TV station.
'Last chance'
Military action was the alternative, Mr Straw told Al Jazeera, which is known to be watched by the Baghdad regime.
"Saddam has to come clean, own up, tell the truth for the first time in his life, and he has got to stop playing games," he said.
"This is the last chance for himself and for the resolution of the Iraq crisis in a peaceful way. The choice is his.
"He can resolve this peacefully but he has got to be straight, he has got to tell the truth, and the truth is that Iraq has had - and has - weapons of mass destruction."