The GMB union will cut funding to up to 35 of the Labour MPs it sponsors, blaming them for betraying Labour values.
At the union's conference in Plymouth, members agreed to maintain funding to the party's central office, but chose to pick out those Labour MPs who did not reflect the union's values.
The vote reflects a further thawing of relations between trade unions and the government, despite Labour's desperate need for financial support.
A motion calling on the union to disaffiliate from Labour was ruled out of order, however.
General secretary Paul Kenny said delegates were angry over taxation, public sector pay, executive bonuses and other issues.
Among those MPs who lost funding from yesterday's vote were Meg Munn, Stephen Ladyman and Adrian Bailey, a backbench MP.