Families of those killed and serving in Iraq reacted with fury when police told them they could not make the gesture or hold a minute's silence on the steps of the Prime Minister's residence.
A No 10 spokeswoman blamed police for the ban, but was forced to backtrack once Scotland Yard pointed out that its officers were following orders.
Following the statement by the Metropolitan Police, No. 10 said it would try to find a way for a smaller wreath to be delivered inside Downing Street.
Eleven people, including relatives of Black Watch soldiers who have died during the conflict, arrived to call on Tony Blair to withdraw-British troops in an event organised by the Stop The War Coalition (STWC). Among the relatives was Maxine Gentle, 14, whose brother Gordon, a Royal Highland Fusilier, was killed by a roadside bomb near Basra in June.
Their mother Rose was hoping to meet Mr Blair in person to demand troops be pulled out.
An STWC spokesman said No.10 should "show some dignity" and allow the families' gesture. "If what Downing Street wants is an image of a 14-year-old girl locked outside, holding a wreath in honour of her dead brother, so be it." Other people joining the group today included Reg Keys, whose Military Policeman son, Lance Corporal Thomas Keys, 20, was murdered by a mob in Iraq last year.
James Buchanan, from Arbroath, whose son Gary is serving in the Black Watch, was also in the group. The Black Watch has lost four soldiers since its controversial deployment near Baghdad.
Mr Blair's official spokesman later said the relatives could bring in a wreath if it was small enough to fit through the X-ray security machines in the street.
The families include members of a new organisation, Military Families Against the War, modelled on a similar group in the US. The two organisations hope to repeat the success of campaigns to withdraw troops from Vietnam in the Seventies.