Labour leader Jeremy Corbyn has called Sir Gerald Kaufman’s allegations about “Jewish money” influencing Conservative policy “unacceptable and deeply regrettable”.
Mr Corbyn said the comments, made by the veteran MP last week , were damaging to community relations.
Labour’s Chief Whip Rosie Winterton met Sir Gerald on Tuesday to discuss the remarks.
Following the meeting Mr Corbyn said: “Last week’s reported comments by Sir Gerald Kaufman about the Jewish community, the Conservative Party and Israel are completely unacceptable and deeply regrettable.
“Such remarks are damaging to community relations, and also do nothing to benefit the Palestinian cause.
“I have always implacably opposed all forms of racism, antisemitism and Islamophobia and will continue to do so. At my request, the Chief Whip has met Sir Gerald and expressed my deep concern.”
Sir Gerald, 85, had been criticised by fellow Jewish MPs and Jewish communal organisations, which had called for his party to take disciplinary action.
Board of Deputies president Jonathan Arkush said: “In light of Mr Corbyn's response, which we welcome, we hope that the party will now act to impose disciplinary measures against Sir Gerald."
Jewish Leadership Council chief executive Simon Johnson said: "The fact that Mr Corbyn has distanced himself from Sir Gerald’s despicable comments is in itself a welcome intervention.
"We await a response from the Chief Whip as to whether any further disciplinary action will be taken and, of course, if Sir Gerald will apologise.”
The Community Security Trust said it welcomed Mr Corbyn's "expression of regret", but called for it to be followed by "firm disciplinary action".
A Labour spokeswoman was unable to comment on what disciplinary action the party might now take.
Speaking at a Palestine Return Centre event in Parliament last Tuesday, Sir Gerald was recorded by blogger David Collier saying that the British government had become more pro-Israel in recent years.
He said: “It’s Jewish money, Jewish donations to the Conservative Party – as in the general election in May – support from the Jewish Chronicle, all of those things, bias the Conservatives.”
Sir Gerald, Father of the House of Commons, then told the audience of 45 people that the Israeli government had made up the recent spate of violent attacks in order to allow it to “execute Palestinians”.
The Manchester Gorton MP said “a friend of mine who lives in East Jerusalem” had emailed him with the accusations about Israel fabricating the attacks.
Sir Gerald then read from the letter: “More than half the stabbing claims were definitely fabricated. The other half, some were true, the others there was no way to tell since they executed Palestinians and no one asked questions.”
The Board of Deputies, Jewish Leadership Council and Community Security Trust had led calls for Labour to take disciplinary action.
Eight Labour MPs had also signed a letter to Mr Corbyn and Ms Winterton, which asked the party that "formal disciplinary proceedings be instigated against Sir Gerald Kaufman".
Parliamentarians including Tulip Siddiq, Wes Streeting and Louise Ellman attached their names to the letter, sent on behalf of the All-Party Parliamentary Group against Antisemitism, which called Sir Gerald's comments "unacceptable, untrue and discriminatory."