Deputy Prime Minister Nick Clegg has launched an attack on David Cameron for "isolating" the UK in Europe with his veto of changes to the EU treaty.
Sources close to the Liberal Democrat leader said he did not feel the failed eurozone crisis negotiations had resulted in a good deal for the UK.
The BBC understands Mr Clegg was dismayed when he was woken early on Friday to hear of the PM's decision.
Initially Mr Clegg said the coalition government was united in its position.
But now sources close to him have confirmed that he "doesn't think this is a good deal for Britain".
Mr Clegg "couldn't believe it", they said, when he was told the summit in Brussels had "spectacularly unravelled".
Nick Clegg was not the first Liberal Democrat to speak after David Cameron refused to sign up for Europe's new grand plan.
But when he did go in front of the cameras he said the two men had worked together on Britain's negotiating stance. The demands were reasonable, he said.
Now his tone has changed - considerably. Europe was already a source of tension in the coalition - with the two parties holding such contrasting views. This will add to that.
The prime minister will be preparing a statement which he is due to give to Parliament on Monday - explaining why he wouldn't sign up to a new EU-wide treaty.
He'll no doubt hear praise from Eurosceptics, on his own side. But sitting next to him will be a deputy who has now attacked him in the press over a summit that he thinks has left the UK isolated and vulnerable.
This will add to existing tensions over Europe in the coalition, our correspondent adds.
The prime minister blocked changes to the EU's Lisbon Treaty at an EU summit, arguing that the proposed changes were not in the UK's interest.
It now looks likely that all 26 other members of the European Union will agree to a new "accord" setting out tougher budget rules aimed at preventing a repeat of the current eurozone crisis.
The Independent on Sunday quotes a source "close to Mr Clegg", as saying: "Nick certainly doesn't think this is a good deal for Britain, for British jobs or British growth.
"It leaves us isolated in Europe and that is not in our national interest. Nick's fear is that we become the lonely man of Europe.
"He could not believe that Cameron hadn't tried to play for more time. That is not how Nick would have played Britain's hand."
The paper also quotes a Lib Dem source who says that if the Conservatives "think we can now go back to Europe with a sackful of demands about repatriating powers, they are living in a fantasy world".
On Saturday Chancellor George Osborne said Mr Cameron's decision to veto changes to the treaty had "helped protect Britain's economic interests".
"We have protected Britain's financial services, and manufacturing companies that need to be able to trade their businesses, their products, into Europe," he said.
"We've protected all these industries from the development of eurozone integration spilling over and affecting the non-euro members of the European Union."
Labour leader Ed Miliband has said the UK will now be excluded from key economic decisions in Europe, while UK Independence Party leader Nigel Farage has said the outcome was "the worst of all worlds" for the UK, leaving the country in Europe but without power.