Pauline Hanson insists her Senate colleague Brian Burston agreed last week to pull support for the Turnbull government's company tax cuts.
But Senator Burston now says he will support the government's plan, in a direct challenge to his leader's authority.
The NSW senator says he was blindsided when Senator Hanson withdrew support for the cuts after initially agreeing to back them, but he plans to honour the deal struck with Finance Minister Mathias Cormann in March.
"I don't want to cause any angst or division in One Nation, but once I make a handshake with somebody -- that's it. I stick to my word," Senator Burston told The Australian newspaper on Thursday.
But Senator Hanson says she spoke to Senator Burston last Monday before the party's change of mind was announced and he agreed to the plan to withdraw support.
"He did," she told reporters.
She confirmed Senator Burston is still a member of One Nation, but said the preselection process for the next election is not yet finalised - putting a cloud over his position at the top of the One Nation senate ticket for NSW.
Senator Cormann insists the government remains committed to the deal it struck with One Nation.
"The government is very appreciative of the fact that Senator Burston has announced that he will stick to the agreement that was reached," the minister told reporters.
He again rejected Senator Derryn Hinch's idea to cap the tax cuts to businesses with an annual turnover of up to $500 million, so the big banks would be exempt.
The government has 31 senators and needs 39 votes to pass its legislation.
The minister implored Labor to change its mind on the cuts, insisting jobs are created by successful and profitable businesses.
"My message to Bill Shorten is - jobs don't grow on trees," Senator Cormann said.
Mr Shorten said Labor would oppose the company tax cuts all the way to the next election.
"I notice that yet again Pauline Hanson's One Nation appears to be split and chaotic," Mr Shorten told reporters.
"The reality is that if you vote One Nation you're voting for corporate tax cuts."
Senator Burston has removed reference to One Nation on his social media accounts.
Labor frontbencher Brendan O'Connor said Senator Burston's split with Senator Hanson would cost the minor party votes ahead of the next election.
"Two nations? Civil war in One Nation," he told reporters in Canberra on Thursday.