Westminster sources have claimed the Prime Minister has now promised Lady Stowell to reinstate her role to a full-time status should the Conservatives win the next General Election.
Limits on the number of full-time Cabinet members and the overall salary bill meant Mr Cameron decided to make the Leader of the Lords one of several senior people who can occasionally "attend" Cabinet. But peers responded angrily at what one called a "constitutional outrage".
It was pointed out that Gordon Brown when Prime Minister had three peers in his Cabinet and that the Lords Leader had been a full-time Cabinet member since 1905.
Their lordships were further incensed when Tory HQ offered to top up Lady Stowell's minister of state salary of £98,740 to that of a full Cabinet member at £134,565 - a difference of £35,825.
Peers pointed out that the Lords Leader did not just represent Conservative members but all members of the Upper House.
Last night, former Commons Speaker Baroness Boothroyd tabled a parliamentary motion, asking Mr Cameron to reconsider his decision.
In a letter to senior peers, Lady Stowell describes her part-time status as a "temporary necessity" and notes that the PM "is committed to restoring the Leader of the House of Lords to a full Cabinet member with full Cabinet pay at the earliest opportunity".
The Lords Leader also explains that, while having her pay topped up from Conservative Party funds was not against the rules, nonetheless, she is a "firm believer that when it comes to potential conflicts of interest and especially where money is involved, it is essential that all interested parties feel the right thing is not only done but is also seen to be done".