Ed Miliband has suspended Lord Ahmed from the Labour Party following reports he blamed his prison sentence on a Jewish conspiracy.
In 2009 the peer was jailed for 12 weeks after sending a text message in the moments before his car was involved in crash that killed a 28-year-old man.
According to The Times, the peer told a Pakistani TV network that the he was treated harshly due to his visits to Gaza.
"My case became more critical because I went to Gaza to support Palestinians. My Jewish friends who own newspapers and TV channels opposed this." he is reported to have said.
The paper also reports Lord Ahmed said the judge, Mr Justice Wilkie, had risen to his position in the judiciary as he had helped out a "Jewish colleague" of Tony Blair.
He told The Times he had “no recollection” of giving the TV interview last year.
A Labour spokesman said: "The Labour Party deplores and does not tolerate any sort of anti-Semitism. Following reports in The Times today we are suspending Lord Ahmed pending an investigation."
Last year Lord Ahmed was suspended from Labour after he was accused of having offered a £10m bounty for President Obama's head. However it later transpired he had actually called for George W Bush and Tony Blair to be brought to the International Court of Justice on war crimes charges.
Jon Benjamin, Chief Executive of the Board of Deputies of British Jews, said: “We are appalled by Lord Ahmed's alleged comments which recall the worst Jewish conspiracy theories. However outlandish and incredible his allegations, there will always be gullible or malicious individuals or groups that will accept what he has said and add to the growth of antisemitic discourse.
“We note that Lord Ahmed has now been suspended from the Labour Party pending a full investigation. If he is found to have indeed made the reported comments, he should be expelled from the Labour Party, as such views should have no space in responsible political discourse.”