Labor factional leader Don Farrell has stepped aside from the top spot on the party's South Australian Senate ticket in favour of Finance Minister Penny Wong.
Senator Farrell's decision, which he announced in an interview on Adelaide radio this morning, is designed to avert a divisive internal brawl.
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Tony Abbott and Julia Gillard under pressure to rethink their approaches on questions that seemed far clearer just a couple of months ago.
Government figures were infuriated by the South Australian decision last weekend to give top billing to Senator Farrell, a low-profile parliamentary secretary known mostly for his role in the leadership coup that installed Julia Gillard as Prime Minister.
The Leader of the House, Anthony Albanese, had threatened to ask the ALP national executive to overturn the decision.
Speaking on ABC radio this morning, Senator Farrell he was concerned the issue was damaging the Labor Party.
Senator Wong will now be the number one Senate ticket holder, and Senator Farrell will be number two.
"I certainly don't want to be part of anything that detracts from the rise of the Labor Party between now and the next election,'' Senator Farrell said.
"I'm still very confident that Julia can in fact win that election. I want to be part of the team that gets her re-elected and I think the best thing I can do for the party right at the moment is to vacate the number one spot.''
Asked about the matter yesterday, Ms Gillard refused to be drawn, saying both senators were serving the government well.
But the Coalition sought to capitalise on the controversy, with Deputy Opposition Leader Julie Bishop suggesting it showed "some people in Labor have a problem with capable women", in a reference to Labor's attacks on Tony Abbott.
Senator Farrell today said Ms Gillard was "pleased" when he told the Prime Minister yesterday that he would swap positions on the ticket with Senator Wong.
He said the "downside" of his decision was that it overturned the democratic decision of the party.
But he said his supporters would expect him to behave in the best interests of the party.
Today in the Labor Party's caucus meeting, Ms Gillard thanked Senator Farrell for stepping aside.
While it is understood that neither Senator Wong nor Senator Farrell spoke on the matter, Ms Gillard's comment did receive some applause from MPs.
Senator Wong paid tribute to Senator Farrell in a statement earlier today, describing him as a ''man of great standing''.
"Throughout his career, Don has always put the Labor Party first and he has demonstrated that principle again today," she said in a statement.
Asked today whether Senator Farrell had done the right thing, former Labor leader Simon Crean told reporters in Canberra: "I think he's done a great thing. Perhaps he should've done the right thing earlier."
Meanwhile, with the issue within Labor now settled, Opposition Leader Tony Abbott today faced questions over why Corey Bernardi had the top spot on the Liberal Senate ticket for South Australia, ahead of the shadow parliamentary secretary for the Murray-Darling Basin, Simon Birmingham.
Senator Bernardi resigned in disgrace from the Liberal frontbench last month after suggesting same-sex marriage could lead to the legalisation of bestiality.
Mr Abbott said today that at the time the preselection was finalised, Senator Bernardi was higher in the standing order than Senator Birmingham.
''The difference between the Labor Party and the Coalition is that when it comes to power inside the Labor Party, the faceless men are always in charge,'' he said.
"And you don't have to believe me - believe Maxine McKew who knows what she's talking about inside the Labor party. She knows the faceless men are running the show.''
with Judith Ireland