For the first time, LibDem ministers will be allowed to vote against Coalition policy, which aims to shake up constituency boundaries, reducing the number of MPs from 650 to 600. This includes a reduction from 59 to 52 in Scotland.
The changes would have created some difficult moments for the Coalition. Scotland's only Conservative seat, Dumfriesshire, Clydesdale and Tweeddale, held by David Mundell, would have been under threat.
Danny Alexander, Chief Secretary to the Treasury, and Charles Kennedy, former LibDem leader, who currently hold adjoining Highland constituencies, could also have been pitted against each other.
While the Prime Minister will plough on with the vote, due in next month, it looks doomed given Labour, the SNP and now the LibDems will oppose the proposed boundary shake-up, delaying it for several years.
The one-off change to collective responsibility was announced by Mr Cameron at yesterday's Cabinet.
It followed a defeat for the Government in the House of Lords on Monday, when LibDems joined Labour peers to put back the boundary review until after the 2015 General Election.
This was the first time Liberal Democrat ministers, six out of seven in the Upper House, had voted against the Coalition.
Cabinet Secretary Sir Jeremy Heywood said it was permissible under the Ministerial Code.
The PM's spokesman said that, as there was a fundamental disagreement on this issue, "collective responsibility will not apply". He said this was the first time this had happened under the Coalition.
The LibDems decided not to back the planned shake-up, which was estimated to benefit the Tories by 20 seats at the next election, because the attempt at Lords reform was scuppered by Conservative backbenchers.
In the aftermath of Monday's Lords vote, LibDem ministers were accused by Lord Forsyth, the former Conservative Scottish Secretary, of "cheating".
He said Tory parliamentary aides in the Commons were sacked for voting against Lords reform He added: "You don't take the Queen's shilling and then go through the lobbies and vote against the Prime Minister. It is an absolute disgrace."
However, Mr Clegg said it was "reasonable" for his ministers to oppose the boundary review.
He said: "You will remember back in the referendum on the Alternative Vote system the highly-regrettable personalised attack by the Conservatives.
"You will remember the House of Lords debate where the Conservative Party decided not to proceed with reform even though it was in their manifesto and the Coalition Agreement.
"I have been open about the fact a coalition is a package deal and when one side of that deal, does not honour their side of the agreement, then it's perfectly reasonable for the other side (to look at other parts).
"We are not voting them down; what we are saying is there is going to be a delay of five years.
"We are leaving the boundary changes on the statute book but we are saying we should miss a beat and do it in the next parliament, not this one."
Lord Hill, the Lords leader, told peers: "It is the situation that the Prime Minister and the Deputy Prime Minister, as leaders of their respective parties, have agreed they will take different positions on this particular issue.
"That is in line with the approach they have taken on a number of other specific issues.
"It does not affect collective responsibility for all other matters and due to the specific agreement on this issue, it does not offend the doctrine of collective responsibility."