Cherie Blair has denied that she accused Gordon Brown of lying during his keynote Labour conference speech.
Mrs Blair said she did not make the remark and does not hold that view
Bloomberg news agency reported that she said "Well, that's a lie" when she heard the chancellor saying it had been a privilege to work with Tony Blair.
However Mrs Blair told reporters: "Honestly, guys, I hate to spoil your story, but I didn't say it and I don't believe it either."
But Bloomberg says it stands by the story and has refused to retract it.
Downing Street earlier described the report that Mrs Blair had accused Mr Brown of lying as "untrue and rubbish".
No 10 said she was accompanied by four people, none of whom heard her say anything.
'Not even there'
The alleged incident reportedly took place as Mr Brown addressed Labour's annual conference in Manchester on Monday, in what was billed as his pitch for the party leadership.
Bloomberg said Mrs Blair's comments came as she walked through the conference exhibition area, past televisions playing Mr Brown's speech. Bloomberg said she appeared unaware that one of its reporters was within earshot.
Carolin Lotter, a producer with Bloomberg, told BBC News she had been "not more than a metre or two" away from Mrs Blair and that she "literally had to step out of the way".
"Everybody was watching, everybody could listen to it, and she was just walking by one of the screens when I heard her say 'Well, that's a lie'," Ms Lotter said.
A Downing Street spokeswoman said: "This story is totally untrue.
"Bloomberg first claimed Mrs Blair stormed out of the hall and flashed that story on their screens.
"When the story was totally denied on Mrs Blair's behalf and it was pointed out that she had not at any time been in the hall, Bloomberg conveniently changed their story.
"The fact is that no version of this story is true and Bloomberg should withdraw it immediately.
"Mrs Blair was accompanied by four people, two of whom were protection officers, none of whom heard her say anything."
But a spokeswoman for Bloomberg insisted the story would not be retracted.
"We stand by our reporting," she said. "The story speaks for itself."
The incident has threatened the attempted united front attempted by the Labour leadership this week.
Angela Eagle, a Labour MP seen as a supporter of Gordon Brown, said it was "tittle-tattle" which had been denied.
She told BBC Radio 4's Today she preferred to talk about the substance of what was in Mr Brown's speech rather than indulge in "gossip".