The move has led to accusations of "editorial cowardice" at the BBC, following the publication of the Hutton Report last week.
'Absolute Power' is a Radio 4 comedy that stars Stephen Fry and John Bird as spin doctors. It has been adapted for television and aired late last year.
The episode that has been withdrawn looks at relations between the government and the BBC following the publication of the Hutton Report. It was recorded last December and in it Alastair Campbell is referred to as "Alas, it's a shambles", according to a report in the Daily Telegraph.
In another line Fry's character, Stephen Prentiss, says there is nothing that he could "teach this prime minister about deception, manipulation and lying. Except how to do it properly".
The Telegraph reports that the episode was due to be broadcast on Thursday night but that the series' writer, Mark Tavener, had been told by the BBC that it was axed.
He said: "I was told, 'It has been pulled because you can't call Tony Blair a liar in the current climate'."
However, Radio 4 has said that the story had been overtaken by events of the day and that it was not pulling the episode because it would antagonise the government.
"The references to the Hutton Report don't sound right any more. There is nothing sinister in this," the Telegraph reports Radio 4 as saying.
The Hutton Report found that the editorial processes at the BBC were "defective", leading to the resignation of director-general Greg Dyke, chairman Gavyn Davies and the reporter at the centre of the controversy, Andrew Gilligan.
Culture secretary Tessa Jowell has vowed that the BBC would be "nobody's lapdog".
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