Last night Ms Oddy said she was "totally astonished" by the decision. "I do not know what the reasons are and do not know what I am supposed to have done," she said.
The MEP for Coventry and Warwickshire North decided last year to take Labour to an industrial tribunal over the way it selected its candidates for next month's European elections. Under the "closed list" system of proportional representation, the public will be able to vote only for a party rather than a candidate.
This gives huge power to the parties to decide which MEPs are elected. Ms Oddy was placed seventh on Labour's list of eight candidates in the West Midlands, giving her little chance of retaining her seat, as Labour is likely to win only four or five seats in the region.
Allies of Ms Oddy said her suspension was a further example of "control freakery" by Labour's Millbank headquarters in London. They said she may now extend her claim of unfair dismissal and sexual and racial discrimination to include "victimisation".
She would also consider standing as an independent candidate on 10 June.
Party sources said the MEP had refused to be included on Labour's election leaflets and had declined to attend several meetings and briefing sessions for candidates.
Officials said her place on the candidates' list had been decided "on merit" and not on political grounds. Her slot will be taken over by Brenda Etchells, a Blair loyalist and a trade union representative on the party's ruling national executive committee.
There were further allegations of "control freakery" yesterday when Ken Livingstone said women and blacks were under-represented on Labour's shortlist for next year's elections to the London assembly. He said only 24 of the 230 women who applied to be candidates had been selected.