Wansbeck MP Ian Lavery said he was "horrified" that the chancellor would seek to exploit the deaths of six children for political ends.
"Sick, sick, sick, Osborne outrageously using the unspeakable Philpott case in an attempt to boost public support for cutting welfare," he said on Twitter.
Labour peer Stewart Wood, a close adviser to Ed Miliband, also said: "I can't help but feel it's wrong for Osborne to exploit our horror at the Philpott case to try to boost public support for cutting welfare."
And shadow employment minister Stephen Timms said it was "wrong to link those acts with the debate about welfare" and that George Osborne should not be doing so, even implicitly.
"Millions of people including pensioners and the disabled, people in work and out of work, receive benefits and tax credits. The government needs to recognise that they are as shocked and disgusted by the callous killing of these children as anyone else in Britain," he said.
Philpott, who was jailed for life with a minimum term of 15 years today for killing six of his children, lived in a council house in Derby, claimed thousands of pounds in benefit.
When asked today if the family were a product of Britain's benefit system, Osborne said: "Philpott is responsible for these absolutely horrendous crimes, these are crimes that have shocked the nation. The courts are responsible for sentencing.
"But I think there is a question for government and for society about the welfare state, and the taxpayers who pay for the welfare state, subsidising lifestyles like that. And I think that debate needs to be had."
The chancellor's comments came after the Daily Mail caused controversy after running a story about Philpott with the headline 'Vile Product Of Welfare UK'. Critics accused the paper of manipulating the tragedy to make a cheap point.
Osborne believes the public is on his side in his attempts to cut welfare payments and the issue is expected to be a key dividing line in the 2015 general election.
But Labour MP Andy McDonald said it was the chancellor who was "out of touch" with how the majority of people felt about welfare.
"He may as well make adverse comments about the entire population of a town or a religion, it's absolute nonsense," McDonald said.
"It just shows the depths to which they are prepared to stoop in demonising people who find themselves in difficult circumstances."
Labour's Dame Anne Begg, who chairs the Commons Work and Pensions Select Committee, told BBC Radio 4's World At One: "It was an evil act and I don't think we should be making policy on the back of a very exceptional case."