Plans to reform the House of Lords are being abandoned after Conservatives "broke the coalition contract", Lib Dem leader Nick Clegg has announced.
Agreement on an elected Lords could not be reached with Tory opponents, he said, and the plans would be shelved rather than face a "slow death".
As a result, he said Lib Dem MPs could not now support Conservative-driven changes to Commons boundaries in 2015.
Labour said the Lords climbdown was a "humiliation" for the coalition.
Changes to the make-up of the Lords would have seen 80% of peers elected and the total number of members halved to 450.
An elected Lords is a long-cherished goal of the Lib Dems but one opposed by many Conservatives - more than 90 of whom defied the government in a vote on the issue in July.
The deputy prime minister said he was "disappointed" to have to give way, adding that he had offered his Conservative partners a referendum on the issue in 2015 as part of a compromise deal but this had been rejected.
He said the Conservatives could not take a "pick and choose" approach to the coalition agreement - which committed the government to bringing forward proposals for a wholly or largely elected body.
To make sure the contract remained "balanced" the Lib Dems now want to delay proposals to reduce the size of the Commons from 650 to 600 MPs and to redraw parliamentary boundaries - thought likely to favour the Conservatives - until after the 2015 election.
While he was still committed to keeping the coalition going, Mr Clegg said it was a "reciprocal arrangement" and could only work if it was based on "mutual respect".
"The Conservative Party is not honouring the commitment to Lords reform and, as a result, part of our contract has now been broken," he said.
"Clearly I cannot permit a situation where Conservative rebels can pick and choose the parts of the contract they like, while Liberal Democrat MPs are bound to the entire agreement."
Although proposals to make constituencies roughly the same size have already been approved in principle by MPs, they require a further vote on their implementation in time for the next election.
Mr Clegg added: "I have told the prime minister that when, in due course, parliament votes on boundary changes for the 2015 election I will be instructing my party to oppose them."
Chancellor George Osborne said MPs would consider the matter next year and the government would "cross any issues with the boundary vote when we get to them".
Mr Osborne insisted the coalition was strong and the government would use the parliamentary time freed up by the withdrawal of the Lords plans to put forward proposals on jobs and growth.
"We have not been able to proceed on Lords reform, frankly, because there is opposition in Parliament and the opportunism of the Labour Party," he said.
"I think we have got to use this moment as an opportunity to focus 110% on the economy - which is what the country wants."
In his press conference, Mr Clegg also criticised Labour for their approach to Lords reform, saying they were "supporting the ends, but - when push comes to shove - obstructing the means".
The opposition joined Conservative rebels in voting against a motion which would have set a timetable for debating the proposals - arguing they were not being given enough scrutiny.
Labour said it was "outrageous" for Mr Clegg to try to blame them - suggesting it was the Conservatives who had "never been serious about reform".
"Today's humiliation for the Government is a spectacular failure of leadership from David Cameron," said shadow justice secretary Sadiq Khan.
"David Cameron's weakness in not being able to control his own party and deliver on the coalition agreement shows a prime minister lacking the leadership our country deserves."
The prime minister told Tory MPs last month he would make "one more try" to push Lords reform through in September when the Commons returned from its summer recess.
Conservative MP John Whittingdale said there was "overwhelming opposition" in the party to an elected Lords and Nick Clegg "just had to accept that reality".
Lib Dem MP Martin Horwood said the Conservatives "had become the G4S of British politics" and had "failed to deliver" - a reference to the firm involved in a row about security ahead of the Olympics.
But the BBC's political correspondent Carole Walker said when Mr Clegg appeared before a committee of MPs earlier this year, he said there was no link between Lords reform and boundary changes.