MPs have backed government plans for £12bn in welfare cuts, but acting Labour leader Harriet Harman suffered a significant rebellion in the vote.
The Commons backed the Welfare Reform and Work Bill by 308 to 124 votes.
Forty-eight Labour MPs defied orders to abstain and instead voted against the bill, which includes plans to limit child tax credit to two children.
Rebels included leadership hopeful Jeremy Corbyn and London mayoral candidates Sadiq Khan and David Lammy.
Of the 53 Labour MPs first elected to Parliament in May, 18 opposed the bill.
During a five-hour debate, Labour MP John McDonnell said he would "swim through vomit" to oppose the legislation.
However, a Labour amendment seeking to derail the legislation was defeated by 308 votes to 208.
Ms Harman has faced criticism for her stance, with many MPs saying she should have been more outspoken in her opposition to curbs on child tax credits and cuts to other in-work benefits.
Mr Corbyn's three Labour leadership rivals - Andy Burnham, Yvette Cooper and Liz Kendall - followed Ms Harman's lead and abstained.
Reacting to the vote, Labour MP Diane Abbott tweeted: "Just voted against Tory welfare bill. Sorry for colleagues who knew it was wrong but abstained. We weren't sent to Parliament to abstain."
Conservative MP and chief secretary to the Treasury Greg Hands tweeted: "47 Labour rebels on welfare tonight. Huge. Biggest Labour rebellion for some time. Leadership crisis without actually having a Leader!"
BBC assistant political editor Norman Smith said things could not be much worse for Labour, with a fifth of the party openly defying the leadership and many more "deeply unhappy".
He told BBC Radio Four's Today programme the split ran "right up through the party, to the shadow cabinet".
The vote showed about half of the new intake were "well to the left of the mainstream", which tells us that the gravitational pull of the party is not back to the centre, but to the left, he added.
He said one of Ms Harman's aides had told him that whoever takes over as party leader has a "hell of a job on their hands".
But Mr Corbyn said the revolt had "strengthened" Labour's position against the Conservatives.
He told BBC Radio 4's Today programme society ought to be "deeply concerned" about child poverty and deprivation levels.
Former Labour Home Secretary David Blunkett, who also served as work and pensions secretary, said the party was in "emotional trauma", and was "not debating enough about where we go from here".
"Last night again focused on us being divided," he said, adding that the Welfare Bill was "clearly not a moment for setting out the alternative".
MPs who won their seats in May were "very lucky" and should ask themselves "why others didn't", he added.
Analysis by Ross Hawkins, BBC political correspondent
First Harriet Harman took a stand - saying Labour had to wake up and listen to voters on welfare.
Then she compromised - tabling an amendment designed to sidestep a row. And then almost 50 rebels ignored her instructions.
Were she Labour's permanent leader, her authority would be in tatters.
But it's not about her; she'll be gone by the autumn.
The real question is: could any of her would-be successors persuade the party that welfare must be reformed now?
Would they want, or dare, to try?
The bill, which also seeks to lower the overall household benefit cap from £26,000 a year to £20,000 outside of London, and £23,000 in London, as well as to train a further three million apprentices, has now cleared its first parliamentary hurdle and will move on to more detailed scrutiny.
In a passionate debate, Conservative MPs lined up to support the measures.
As well as Labour MPs who did not support the bill, it was opposed by the SNP, the Liberal Democrats, Plaid Cymru and the Greens.
Mr McDonnell said: "I would swim through vomit to vote against this bill and listening to some of the nauseating speeches tonight I think we might have to.
"Poverty in my constituency is not a lifestyle choice, it is imposed upon people.
"We hear lots about how high the welfare bill is, let's understand why that's the case.
"The housing benefit bill is so high because for generations we've failed to build council houses, we've failed to control rents, we've done nothing about the 300,000 properties that stand empty in this country."
SNP employment spokeswoman Hannah Bardell said it was "disgraceful" that Labour had not joined her party in opposing the bill.
"Labour had the perfect opportunity to join the SNP in a progressive coalition to oppose the Tories - but with some honourable exceptions they sat on their hands," she said.
On Twitter, SNP MP Pete Wishart said it was "apparent" that Labour and the SNP together could have defeated the bill.
Tim Farron, in his first Commons speech as Liberal Democrat leader, said his party was voting against the "unfair, unwise and inhuman" proposals.
Work and Pensions Secretary Iain Duncan Smith said Labour was beset by "internal fear and loathing" and that the bill would put welfare funding on a "more sustainable footing" while protecting those most in need.
Speaking after the vote, he said: "Nearly 50 Labour MPs have defied their leadership and opposed our welfare reforms which will move our country from a low wage, high tax and high welfare economy to a higher wage, lower tax and lower welfare society.
"It's clear that Labour are still the same old anti-worker party - just offering more welfare, more borrowing and more taxes."
MPs who voted against the bill
Abbott, Diane - Labour MP for Hackney North and Stoke Newington
Abrahams, Debbie - Labour MP for Oldham East and Saddleworth
Ahmed-Sheikh, Tasmina - SNP MP for Ochil and South Perthshire
Anderson, David - Labour MP for Blaydon
Arkless, Richard - SNP MP for Dumfries and Galloway
Bardell, Hannah - SNP MP for Livingston
Black, Mhairi - SNP MP for Paisley and Renfrewshire South
Blackford, Ian - SNP MP for Ross, Skye and Lochaber
Blackman, Kirsty - SNP MP for Aberdeen North
Boswell, Philip - SNP MP for Coatbridge, Chryston and Bellshill
Brake, Tom - Lib Dem MP for Carshalton and Wallington
Brock, Deidre - SNP MP for Edinburgh North and Leith
Brown, Alan - SNP MP for Kilmarnock and Loudoun
Burgon, Richard - Labour MP for Leeds East
Butler, Dawn - Labour MP for Brent Central
Cameron, Dr Lisa - SNP MP for East Kilbride, Strathaven and Lesmahagow
Campbell, Gregory - DUP MP for East Londonderry
Carmichael, Alistair - Lib Dem MP for Orkney and Shetland
Chapman, Douglas - SNP MP for Dunfermline and West Fife
Cherry, Joanna - SNP MP for Edinburgh South West
Clegg, Nick - Lib Dem MP for Sheffield Hallam
Clwyd, Ann - Labour MP for Cynon Valley
Corbyn, Jeremy - Labour MP for Islington North
Cowan, Ronnie - SNP MP for Inverclyde
Crawley, Angela - SNP MP for Lanark and Hamilton East
Davies, Geraint - Labour MP for Swansea West
Day, Martyn - SNP MP for Linlithgow and East Falkirk
Docherty, Martin John - SNP MP for West Dunbartonshire
Dodds, Nigel - DUP MP for Belfast North
Donaldson, Jeffrey M - DUP MP for Lagan Valley
Donaldson, Stuart - SNP MP for West Aberdeenshire and Kincardine
Dowd, Peter - Labour MP for Bootle
Durkan, Mark - SDLP MP for Foyle
Edwards, Jonathan - Plaid Cymru MP for Carmarthen East and Dinefwr
Farron, Tim - Lib Dem MP for Westmorland and Lonsdale
Fellows, Marion - SNP MP for Motherwell and Wishaw
Ferrier, Margaret - SNP MP for Rutherglen and Hamilton West
Flynn, Paul - Labour MP for Newport West
Gethins, Stephen - SNP MP for North East Fife
Gibson, Patricia - SNP MP for North Ayrshire and Arran
Glindon, Mary - Labour MP for North Tyneside
Godsiff, Roger - Labour MP for Birmingham, Hall Green
Goodman, Helen - Labour MP for Bishop Auckland
Grady, Patrick - SNP MP for Glasgow North
Grant, Peter - SNP MP for Glenrothes
Gray, Neil - SNP MP for Airdrie and Shotts
Greenwood, Margaret - Labour MP for Wirral West
Haigh, Louise - Labour MP for Sheffield, Heeley
Harris, Carolyn - Labour MP for Swansea East
Hayman, Sue - Labour MP for Workington
Hendry, Drew - SNP MP for Inverness, Nairn, Badenoch and Strathspey
Hosie, Stewart - SNP MP for Dundee East
Hussain, Imran - Labour MP for Bradford East
Jones, Gerald - Labour MP for Merthyr Tydfil and Rhymney
Jones, Helen - Labour MP for Warrington North
Kaufman, Sir Gerald - Labour MP for Manchester Gorton
Kerevan, George - SNP MP for East Lothian
Kerr, Calum - SNP MP for Berwickshire, Roxburgh and Selkirk
Khan, Sadiq - Labour MP for Tooting
Kinahan, Danny - UUP MP for South Antrim
Lamb, Norman - Lib Dem MP for North Norfolk
Lammy, David - Labour MP for Tottenham
Lavery, Ian - Labour MP for Wansbeck
Law, Chris - SNP MP for Dundee West
Lewis, Clive - Labour MP for Norwich South
Long Bailey, Rebecca - Labour MP for Salford and Eccles
Lucas, Caroline - Green MP for Brighton, Pavilion
MacNeil, Angus Brendan - SNP MP for Na h-Eileanan an Iar
Marris, Rob - Labour MP for Wolverhampton South West
Maskell, Rachael - Labour MP for York Central
Mc Nally, John - SNP MP for Falkirk
McCaig, Callum - SNP MP for Aberdeen South
McDonald, Andy - Labour MP for Middlesbrough
McDonald, Stewart - SNP MP for Glasgow South
McDonald, Stuart C - SNP MP for Cumbernauld, Kilsyth and Kirkintilloch East
McDonnell, Dr Alasdair - SDLP MP for Belfast South
McDonnell, John - Labour MP for Hayes and Harlington
McGarry, Natalie - SNP MP for Glasgow East
McInnes, Liz - Labour MP for Heywood and Middleton
McLaughlin, Anne - SNP MP for Glasgow North East
Meacher, Michael - Labour MP for Oldham West and Royton
Mearns, Ian - Labour MP for Gateshead
Monaghan, Carol - SNP MP for Glasgow North West
Monaghan, Dr Paul - SNP MP for Caithness, Sutherland and Easter Ross
Moon, Madeleine - Labour MP for Bridgend
Morris, Grahame M - Labour MP for Easington
Mulholland, Greg - Lib Dem MP for Leeds North West
Mullin, Roger - SNP MP for Kirkcaldy and Cowdenbeath
Newlands, Gavin - SNP MP for Paisley and Renfrewshire North
Nicolson, John - SNP MP for East Dunbartonshire
O'Hara, Brendan - SNP MP for Argyll and Bute
Osamor, Kate - Labour MP for Edmonton
Oswald, Kirsten - SNP MP for East Renfrewshire
Paisley, Ian - DUP MP for North Antrim
Paterson, Steven - SNP MP for Stirling
Pearce, Teresa - Labour MP for Erith and Thamesmead
Pugh, John - Lib Dem MP for Southport
Rimmer, Marie - Labour MP for St Helens South and Whiston
Ritchie, Margaret - SDLP MP for South Down
Robertson, Angus - SNP MP for Moray
Salmond, Alex - SNP MP for Gordon
Saville Roberts, Liz - Plaid Cymru MP for Dwyfor Meirionnydd
Shannon, Jim - DUP MP for Strangford
Sheppard, Tommy - SNP MP for Edinburgh East
Sherriff, Paula - Labour MP for Dewsbury
Siddiq, Tulip - Labour MP for Hampstead and Kilburn
Skinner, Dennis - Labour MP for Bolsover
Smith, Cat - Labour MP for Lancaster and Fleetwood
Stephens, Chris - SNP MP for Glasgow South West
Stevens, Jo - Labour MP for Cardiff Central
Stringer, Graham - Labour MP for Blackley and Broughton
Thewliss, Alison - SNP MP for Glasgow Central
Thomson, Michelle - SNP MP for Edinburgh West
Weir, Mike - SNP MP for Angus
Whiteford, Dr Eilidh - SNP MP for Banff and Buchan
Whitford, Dr Philippa - SNP MP for Central Ayrshire
Williams, Hywel - Plaid Cymru MP for Argon
Williams, Mr Mark - Lib Dem MP for Ceredigion
Wilson, Corri - SNP MP for Ayr, Carrick and Cumnock
Wilson, Sammy - DUP MP for East Antrim
Winnick, David - Labour MP for Walsall North
Wishart, Pete - SNP MP for Perth and North Perthshire
Wright, Iain - Labour MP for Hartlepool
Zeichner, Daniel - Labour MP for Cambridge