Ninety Labour MPs and peers have criticised the decision to readmit MP Chris Williamson into the party.
They expressed “hurt and anger” at the ruling and said Jeremy Corbyn must withdraw the party whip.
The Derby North MP was suspended after saying Labour had “given too much ground” in the face of criticism over anti-Semitism in the party.
Eleven frontbenchers, including deputy leader Tom Watson, are among those criticising the ruling.
A statement signed by 90 Labour parliamentarians says that, as Labour is being investigated by the Equality and Human Rights Commission over allegations of anti-Semitism, the case is “particularly important”.
They criticise the process by which Mr Williamson was allowed back into the party, adding: “It is clear to us that the Labour Party’s disciplinary process remains mired by the appearance of political interference. This must stop. We need a truly independent process.”
They called on Mr Corbyn to “show leadership” by asking for this “damaging decision to be overturned and reviewed”.
Mr Watson told the BBC he was “bewildered by the decision” to readmit Mr Williamson.
“They have taken away a proper disciplinary inquiry that would have got to the facts of this case. That’s why I’ve put my name to a letter,” he said.
“The upset and the anger is so great, we need to act swiftly.”
Separately more than 70 Labour staff members have signed a letter to the party’s general secretary Jennie Formby to express their dismay at the decision.
But, speaking before the publication of the letter, Mr Corbyn said he had not been involved in the decision to readmit Mr Williamson.
“It was an independent panel set up through [Labour’s ruling body] the National Executive. They examined the case, they decided to let him back in, albeit with a reprimand.”
He said the party deals with anti-Semitism “very, very serious” and there was no place for it.
“And anyone that makes anti-Semitic remarks can expect at the very least to be reprimanded and if they are very serious and engaged in anti-Semitic activity then they will be expelled from the party,” he said.
Who is Chris Williamson?
- The 62-year-old is one of the most outspoken MPs on the left of the party
- A former bricklayer and social worker, he was a councillor before entering Parliament
- Led Derby Council twice in the 2000s, where he formed a coalition with the Tories
- Elected as MP for Derby North in 2010
- Lost the seat in 2015 but won it back two years later
- Has called on critics of Jeremy Corbyn to be de-selected
Mr Williamson was readmitted to Labour on Wednesday, following his suspension in February.
He was suspended following publication of footage showing Mr Williamson telling activists Labour had been “too apologetic” over anti-Semitism and was being “demonised as a racist, bigoted party”.
He later said he “deeply” regretted the remarks and did not want anyone to think he was “minimising the cancer of anti-Semitism”.
After his readmission, he told BBC Radio Derby: “Anybody who knows me, who knows my record, knows I’m someone who has stood up against bigotry throughout my political life and indeed beforehand.”
A Labour source said Mr Williamson had been found to have breached party rules and given a formal sanction.
They said he could face further action if he repeats any similar behaviour.
But there has been strong criticism of Mr Williamson’s readmission from several Labour figures, including MP Dame Margaret Hodge, who described the decision as “appalling, outrageous and unacceptable”.
Another MP, Wes Streeting, told BBC News one of his own local party members had described the ruling as “like a punch in the stomach” and accused Mr Williamson of downplaying and dismissing concerns about anti-Semitism.
The Equalities and Human Rights Commission confirmed in May it would be launching a probe into whether Labour had “unlawfully discriminated against, harassed or victimised people because they are Jewish”.