Germany had a "de facto veto" on the Prime Minister's EU reform plans, ex-minister Iain Duncan Smith claims.
The ex-Tory leader said Berlin exercised the "ultimate power" over what changes David Cameron sought from Brussels.
He told The Sun this led to Cameron being forced to drop a cap on foreign workers coming to the EU - a key demand - at the final hour on Germany's behest.
"It's like they were sitting in a room, even when they were not there. There was a spare chair for them - called the German chair. They have had a de facto veto over everything," Duncan Smith told the newspaper.
"I know that right up until the midnight hour, there was a strong line in there about restricting the flow of migrants from the European Union - an emergency brake on overall migration.
"That was dropped, literally the night before. And it was dropped because the Germans said if that is in the speech, we will have to attack it."
The PM's failed to announce an "emergency brake" on the overall numbers coming to the UK in the November 2014 speech despite media reports he would do so.
Foreign Secretary Philip Hammond denied Cameron "backed off" in the face of pressure from German chancellor Angela Merkel and said simply that the UK had "sought to work with our partners in the European Union".
In the eventual deal, the UK was granted to right to apply for a seven-year "emergency brake" under which new migrants will only receive the right to claim in-work benefits gradually over the course of four years.
But Duncan Smith claims we are "now in a worse position than we were before".
"We put ourselves in a compliant position to another country which doesn't have your best interests necessarily at heart.
"We have gone from wanting to lead in Europe to being on the end of a lead in Europe."
Duncan Smith, who quit as work and pensions secretary in March in protest at disability benefit cuts, will follow Justice Secretary Michael Gove and former London mayor Boris Johnson in making high-profile speeches on the case for a "leave" vote in the referendum on June 23.