A union that supported Ed Miliband's election as Labour leader has decided to cut its affiliation funds to the party from £1.2 million to £150,000.
The GMB union, the UK's third biggest trade union, said there will be further reductions in spending on Labour Party campaigns and initiatives.
The decision by the 65-member GMB executive follows plans by Mr Miliband to give individual union members the choice of opting to join the party rather than being automatically affiliated.
There have been estimates that the change will cost Labour at least £9 million, a figure backed up by the GMB decision.
However, Labour said its biggest financial contribution comes from small donations and members.
The union said in a statement:
GMB CEC expressed considerable regret about the apparent lack of understanding the proposal mooted by Ed Miliband will have on the collective nature of trade union engagement with the Labour Party.
Tension between Labour and the unions has been building since the Falkirk row broke out earlier in the summer, although unions have been unhappy with the party for some time over its policies.
Labour's[ former General Election co-ordinator Tom Watson, who resigned his shadow cabinet post over Falkirk, has pledged to "fight very hard" to retain the party's links with trade unions.
Mr Watson wrote on his blog, "If this is the beginning of the end of that historic link, it is a very serious development that threatens a pillar of our democracy that has endured for over one hundred years."
Shadow Treasury secretary Rachel Reeves said she was "confident" more trade union members would sign up under the new system.
"Most of the money that the Labour Party receives comes from small donations and members," she told BBC Radio 4's Today programme.
Mr Miliband will address next week's TUC Congress in Bournemouth in his first major speech to such a large gathering of union activists since announcing the reforms.