Cherie Blair has denied claims that she branded Chancellor Gordon Brown a liar.
The allegation threatened to overshadow Mr Brown's keynote speech to Labour's annual conference in Manchester.
The Bloomberg news agency reported that one of its producers overheard Mrs Blair make the comment while watching Brown's speech on a monitor in the conference building.
But later 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."
Bloomberg's report initially stated that Mrs Blair left the auditorium during Mr Brown's speech.
But the agency later amended its story to say that the PM's wife was overheard as she walked through a display area outside the main hall.
At the time, TV monitors were relaying live footage of Mr Brown praising the strength of his relationship with Tony Blair. Apparently unaware that a journalist was within earshot, Mrs Blair is reported to have commented: "Well, that's a lie."
The report threatened to knock Mr Brown's speech off the newspaper front pages and down the TV news bulletins, taking attention away from his message of Labour unity.
Aware of the potential for damaging headlines on a crucial week for Labour, Downing Street issued a furious denial, insisting that none of the four people with Mrs Blair had heard her say anything.
But Bloomberg insisted it would not retract its report, issuing a statement to say: "We stand by our reporting. The story speaks for itself."
Mrs Blair's denial came as she left the main conference hotel, the Radisson Edwardian, to be driven away in a car around 7.15pm this evening.
