The bill underpinning the National Offender Management Service (Noms) could be shelved, increasing uncertainty about the body's future.
Harry Fletcher, assistant general secretary of probation union Napo, said government sources had pointed to the Management of Offenders and Sentencing Bill being held back.
Another source close to the development of the bill, which received its first reading in the House of Lords in January, said that it "would not make it through" the current parliamentary session.
The source added that the sentencing proposals would be put in "through the backdoor" in the Sentencing and Youth Justice Bill, which the Home Office has said will be published in the autumn.
Should this happen the elements concerning Noms would have to be reintroduced in the parliamentary session beginning in November 2006.
Since its creation, Noms has come under fire for plans to
develop a market in probation services, and its future has been
called into question by the imminent departure of chief executive
Martin Narey to head
children's charity Barnardo's.
"This could be a further sign that Noms will be kicked into the long grass," Fletcher said, adding: "Officials are frustrated by the lack of detail about the design of Noms, and with the departure of Martin Narey in the autumn, it will lose its main defender."
A Home Office spokesperson denied the claims and said the Management of Offenders and Sentencing Bill would go ahead.
She added: "We can say nothing further at this stage about what is and isn't going to be in the bill."
In a recent update for staff, Narey admitted there were "still some questions to be answered around the organisational design of Noms and what it will actually mean in practice".
But he added he was "confident" that the bill "would be ready" by the time he left in October.
Home secretary Charles Clarke is expected to make key announcements about Labour's plans for penal policy when he gives the annual Prison Reform Trust lecture on 19 September.
