HuffPost UK revealed how Hayter compared the “bunker mentality” of the Labour leader and his inner circle with the 1930s Nazi regime at a meeting on Tuesday.
The party has now sacked the party’s deputy leader of the Lords and called her comments “truly contemptible, and grossly insensitive to Jewish staff”.
Hayter had been criticising Corbyn over his handling of the anti-Semitism crisis facing the party.
A Labour spokesman told HuffPost UK: “Diane Hayter has been sacked from the frontbench position with immediate effect for her deeply offensive remarks about Jeremy Corbyn and his office.
“To compare the Labour leader and the Labour Party staff working to elect a Labour government to the Nazi regime is truly contemptible, and grossly insensitive to Jewish staff in particular.”
Labour MP Wes Streeting described Hayter’s sacking as a “gross over-reaction”.
Hayter, who will remain in the elected position of deputy leader of the Labour lords, had alleged the party refused to share vital information with the National Executive Committee on party finances, membership figures and the anti-Semitism data shared with the Equality and Human Rights Commission investigation.
“That declaiming of intelligence, the refusal to share is an absolute symbol of the bunker mentality,” Hayter said.
She went on to say Corbyn’s team were refusing to acknowledge criticism or listen to information on polling, saying: “Those of you who haven’t [read the book] will have seen the film ‘Bunker’, about the last days of Hitler, where you stop receiving any information into the inner group which suggests that things are not going the way you want.”
She added: “That seems to be where we are at the moment: having the leadership in a bunker so they are not hearing in those views, that evidence, that is in conflict with what they are trying to do, to the extent that even undermines what they are trying to do.”