David Cameron branded Ed Balls a "muttering idiot" in an angry outburst during PMQs today.
The prime minister was forced to retract his statement by Speaker John Bercow, who said it was unparliamentary language.
The shadow chancellor had been making comments to Mr Cameron throughout the session, repeatedly referring to how much wine he had drunk that morning – a play on a new biography of the prime minister which said he drinks the better half of a bottle on Sundays.
The outburst startled MPs in the Commons and is likely to be referred to as evidence that Mr Cameron struggles to control his temper during parliamentary exchanges.
Ed Miliband also clashed with Mr Cameron on the Beecroft report into employment rights, highlighting a statement from the author which argued that unfair dismissals were "a price worth paying".
Mr Cameron defended the report, although he is unlikely to carry through the employment rights aspect for normal-sized firms.
The Labour leader also focussed on the discrepancy in the government approach to the report, with Tory backbenchers supporting it and business secretary Vince Cable calling it "the wrong approach".
Mr Cameron replied: "It was a good report and it's right we take forward its best measures.
"He must worry about being fired at will for being incompetent."
The two men clashed again later when Mr Cameron issued a statement on the G8 and Nato summits.
Mr Miliband argued international opinion on the economy was splitting with Barack Obama and French president Francois Holland on one side and the rest of Europe's centre-right leaders on the other.
"For two years he has been the high priest of austerity," Mr Miliband said.
"He can't be part of the solution because he's part of the problem. All he offers is more austerity."
Parliament goes into a short recess later this week, but will return in June.