Minister Margaret Hodge is reported to have called the Iraq war Tony Blair's "big mistake in foreign affairs".
Mrs Hodge is said to have denied the remarks
She said she had had doubts about Mr Blair's attitude to foreign affairs as back as 1998, according to The Islington Tribune.
The industry minister also criticised Mr Blair's "moral imperialism", the newspaper adds.
Mrs Hodge is said to have denied the comments, which the paper says she made at a private dinner in North London.
Replying to a question from a guest at the Fabian Society event - that she had accepted Mr Blair's arguments about the supposed dangers posed by Iraq because "he was our leader and I trusted him," the paper writes.
After she had criticised the prime minister she said: "I hope this isn't going to be reported."
Labour Party member Chris Roche told the BBC that the editor of the Islington Tribune had been his guest at the dinner - and said Mrs Hodge had made the comments.
He added: "It's a debate that's been going on for some time in the Labour Party in general and specifically in Islington, it's certainly something that the electorate were debating in the local elections of May of this year.
"It's perhaps just a little bit surprising that Margaret Hodge was willing to be so open."
A Downing Street spokesman said it had "nothing to say" about the reported comments.
BBC political correspondent Gary O'Donoghue said, if true, the remarks would be "the most inflammatory remarks made by a member of the government about Tony Blair's policy to date".
The Islington Tribune said its editor Eric Gordon made a shorthand note of the remarks and the story had been "checked thoroughly".
Lib Dem leader Sir Menzies Campbell said the comments reflected the "increasingly divided" nature of the Labour Party.
"At last Labour ministers are beginning to acknowledge what many members of their party and the public know to be true," he added.
And SNP leader Alex Salmond said Mr Blair's "house of cards" was coming down around him.
"The truth is now revealing itself, Labour simply can't paper over the cracks of their failing foreign policy forever," he said.
Mr Blair, who saw off a cross-party bid to force an immediate inquiry into the war earlier this month, has said he will not rule one out, once British troops have come home.