The Popular Party's number two, Maria Dolores de Cospedal, is suing its disgraced former treasurer Luis Barcenas for accusing her of accepting illegal payments.
Analysts warn her counter-attack could backfire by reviving the scandal.
The affair has outraged ordinary Spaniards and sparked calls for Prime Minister Mariano Rajoy to resign just as he tries to steer the eurozone's fourth-biggest economy out of an economic crisis.
Summoned to answer the defamation charges, Barcenas used the opportunity on Friday to repeat claims that he had personally handed undeclared cash payments
of thousands of euros (dollars) to top party leaders.
"I gave payments to Senora de Cospedal with my own hand" in her offices in 2008, he said, in extracts broadcast on national television, testifying by video link from the Madrid jail where he is detained in a separate graft case.
The scandal exploded in January when a newspaper published copies of account ledgers handwritten by Barcenas, purportedly showing payments from a
secret slush fund.
In testimony in July, Barcenas named Rajoy as well as Cospedal, the party's secretary general, among the PP officials who benefited.
Rajoy has denied that he or other party figures received illegal payments and rejected calls to step down over the affair.
A judge has questioned Cospedal as a witness in that case but ruled out summoning Rajoy.
The affair had quietened down over recent weeks until Cospedal's own suit came to court on Friday.
She was angry at being stained by the scandal when she herself had overseen reforms to make the party more transparent, said Fernando Vallespin, a political scientist at Madrid Autonomous University.
"But her suit against Barcenas has just meant that now we are talking about the affair again," and her party colleagues are alarmed that Barcenas got the chance to repeat his charges, Vallespin told AFP on Saturday.
An affair that had calmed down in recent weeks is suddenly back on the front pages."
Leading centre-left newspaper El Pais said party members were "bewildered" by Cospedal's decision to take Barcenas to court which provided a spectacle
that was "devastating for the party's image".
"Cospedal's decision has totally broken the PP's strategy and that of the prime minister, which was not to say a word about the Barcenas case to try and make it go away," the daily wrote.
Testifying in turn on Friday, Cospedal denied Barcenas's claim that she had accepted two payments of 7,500 euros ($10,200) from him in 2008.
Right-leaning newspaper El Mundo said she failed however to clarify whether other party members accepted such payments, which "increases suspicion and
reopens the scandal" in the party.
Barcenas was jailed in June pending an investigation into allegations that he held 47 million euros in secret Swiss bank accounts.
The High Court is separately investigating the allegations of financing irregularities in the party, which span nearly 20 years.
"This is never going to end until there is a firm sentence" in that case, said Vallespin.
"I don't think many people will be convicted, except for Barcenas. Judicially, the party can survive it," but Rajoy may pay a political price if the court confirms financial irregularities in the party and if the ruling comes near election time, the analyst added.
The next general election is due in 2015 and big Spanish court cases can take years.
"It depends a lot on what can be proved in court," said Vallespin.
"Meanwhile this case has done a lot of damage to the Popular Party."