Theresa May has seen her Brexit Bill defeated after the House of Lords backed an amendment to protect the rights of EU citizens to remain in the UK post Brexit.
This is the first Parliamentary defeat for the government's bill on exiting the EU.
The House of Lords backed the amendment by 358 votes to 256. MPs however will be able to remove the amendments introduced by the House of Lords when the bill returns to the House of Commons, the BBC says.
Ministers have said that the issue of EU nationals living in the UK is a priority but added it must be part of a deal to protect UK expatriates who are living in the bloc.
The amended Bill will now be put forward to the House of Commons on 13 and 14 March when MPs will debate on the changes made. They can decide whether to retain the amendments or simply throw them out.
The Telegraph noted that Baroness Smith, the Labour Leader of the Lords had already said in February that peers are unlikely to fight further if MPs decide to vote out their amendments.
If this should happen, May will be able to declare on 15 March that the Brexit Bill has received its royal assent and negotiations about Brexit can begin.
The newspaper said Tory MPs were confident that the House of Commons will overturn the peers' amendments in 10 days.
"The Commons voted decisively that the rights of Brits abroad are just as important as the rights of EU nationals living here. People will find it hard to understand why the un-elected House of Lords thinks that is wrong," John Penrose, the former Tory constitution minister said.
Gisela Stuart, the chair of the pro-leave Change Britain group was not impressed. "This bill is simply about giving the prime minister the authority to trigger Article 50. Nothing more, nothing less.
"There are of course issues which need to be resolved, such as the status of EU nationals, but these should be done separately to the bill," she said, adding that there will be a lot of opportunities to debate these issues.
Government disappointed by Lords move
A spokesperson for the department for exiting the European Union said: "We are disappointed the Lords have chosen to amend a Bill that the Commons passed without amendment.
"The Bill has a straightforward purpose - to enact the referendum result and allow the government to get on with the negotiations. Our position on EU nationals has repeatedly been made clear.
"We want to guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals living in other member states, as early as we can," the spokesperson added.
Home Secretary Amber Rudd had even written a letter to the House of Lords outlining the government's plans to treat EU citizens with the utmost respect in a bid to stop peers from backing the amendment.
"A unilateral move by the government to address the issues facing EU nationals in the UK, however well intentioned, will not help the situation of the hundreds of thousands of our citizens in the EU," she said in the letter.