Thursday's two by-elections saw Labour lose one seat and barely retain the other.
Labour lost Leicester South, which it had held almost without break for the past five decades, to a candidate from the anti-Iraq war Liberal Democrat party.
Shortly beforehand it was announced that Labour had narrowly squeaked through in a parallel poll in the nearby city of Birmingham, also central England.
However there, Labour's majority of almost 12,000 votes in the last general election of 2001 was shaved to less than 500, a massive 26% vote swing away from the party.
The twin polls - sparked by the death of one MP and the departure of another for a top job in Europe - had been billed as a plebiscite on Blair's rule, and especially his support for the US-led war in Iraq.
"Yesterday, Lord Butler gave his views on Tony Blair's reasoning for backing the invasion of Iraq. Today, people in Leicester have given theirs"
Parmat Singh Gill,
Liberal Democrat winner
Iraq was viewed as especially significant given that both Leicester and Birmingham have a high proportion of Muslim, Hindu and Sikh voters of South Asian origin, many of whom opposed the war.
The voting on Thursday came only a day after an official report concluded that Blair led the country into the conflict on the basis of largely unreliable intelligence about Iraq's alleged weapons of mass destruction (WMDs).
The inquiry led by former top civil servant Lord Butler did, however, clear the government of deliberately trying to hype the case for war.
Views on war
But victorious Liberal Democrat candidate Parmjit Singh Gill said his local population, more than a third of whom are of South Asian origin, had other ideas.
"Yesterday, Lord Butler gave his views on Tony Blair's reasoning for backing the invasion of Iraq. Today, people in Leicester have given theirs," Gill said after the result was announced.
The by-election was considered a
referendum on Blair policies
Blair argued that the war to remove Saddam Hussein was necessary almost entirely on the basis that Baghdad posed a direct threat to the West, and his popularity slumped after no WMDs came to light after the war.
This has been reflected in earlier voting, with Labour losing another formerly rock-solid seat to the Liberal Democrats in a by-election last year and taking a terrible beating in local and
European elections last month.
The new reverses will ratchet up recent speculation that Blair's respected finance minister Gordon Brown could be considering an internal coup to oust the prime minister.
Conservatives come 3rd
There was, however, some good news for Blair.
While Labour did poorly, the main opposition Conservative party - most likely to challenge Blair in a general election expected next year - slumped to a miserable third place in both by-elections.
Blair's Health Secretary John Reid called Friday's results a "score draw", while admitting that Labour faced difficulties.
"We need to re-double our efforts. We have got a challenge, no doubt about that," he told BBC television.
Political analysts noted that although Blair could take comfort from the poor Conservative performance, and might well win another general election due to the lack of a credible alternative, he faced major problems.
Recent polls had shown a "rather consistent pattern" of plummeting Labour support, said John Curtice, professor of politics at the University of Strathclyde in Glasgow.
"The message must now be that you are pretty unpopular," he told the BBC.