Mandelson, who first proposed allowing the private sector to take a stake in Royal Mail in 1998, has told colleagues he is still inclined to this line of thinking, according to a Financial Times interview published yesterday.
He told the FT that if he had not been forced to resign as trade and industry secretary at the time the proposal would have become law.
Billy Hayes, general secretary of the Communication Workers Union, said: "Peter Mandelson has only just come back into government, but he should be aware that there is a clear commitment from the Labour government to keep Royal Mail in the public sector, restated earlier this year at the national policy forum in Warwick.
"At a time of economic instability the last thing the British public wants to hear is that privatisation is the solution to Royal Mail's problems."
The CWU, which has previously threatened to stop its substantial contributions to Labour's coffers over the issue, is supported by a number of Labour MPs.
John McDonnell, Labour MP for Hayes and Harlington and chair of the left-leaning Labour Representation Committee, said: "This proposed privatisation is madness. It would undermine an essential public service.
"Throwing the Post Office to the wolves of the private sector will lead to further job losses and cuts in services on an unprecedented scale, and will not be forgiven by Labour supporters. Mandelson will be in for the fight of his life."
The spat comes weeks before the publication of the independent review by Richard Hooper on the future of the postal sector.
This article was first published on brandrepublic.com