In a private letter to 1,000 members of the city's constituency party, Tom Sawyer, Labour's general secretary, accused him of "lacking candour" and misleading officials.
Mr Lloyd, a barrister and deputy leader of Exeter City Council, hotly denied the charges and is to resist pressure to stand down at a crucial party meeting on Tuesday.
In his message to members, Mr Sawyer says the party's national executive committee (NEC) has asked Mr Lloyd to stand down as parliamentary candidate for the seat he contested in 1992, coming within 3,045 votes of victory.
"Someone else should now be allowed to carry Labour's banner in Exeter at the approaching general election," he says. An investigation by senior members of the NEC had concluded that Mr Lloyd "has misled party officials over his involvement as a young man in events in South Africa some 30 years ago. The NEC has now taken the view that John's apparent lack of candour makes him unsuitable to continue to act as the party representative in this important capacity".
Mr Lloyd said yesterday: "I resent very strongly the imputation of dishonesty. I think it is a trumped-up charge."
He has admitted having been a member of the African Resistance Movement (ARM), a group of white students and intellectuals responsible for planting bombs on "symbolic targets like radio masts and electricity pylons" in South Africa in the early Sixties. But he also insists: "I have always been up-front about my past."
His history resurfaced last autumn, when the left-wing journal Tribune raked up his guerrilla activities and his role in turning state's evidence against former ARM colleagues. Mr Lloyd's testimony was instrumental in the conviction of John Harris for the July 1964 bombing of Johannesburg railway station in which a 77-year-old woman died. Harris was hanged.
The Labour Party general secretary has told members in Exeter that the decision to require Mr Lloyd to stand down is "final". He adds: "We will in the very near future wish to proceed to allow party members in Exeter to select a new prospective parliamentary candidate as soon as possible."
However, Labour leaders may not find the process so easy. Mr Lloyd's supporters claim that the NEC decision has the backing of "only a handful" of members in Exeter. Mr Lloyd also has the support of the big unions, including the RMT bus branch which yesterday condemned the "shameful way" he had been treated and called on the national executive to reconsider its decision.
The Exeter party general committee meets on Tuesday evening to discuss the next move. Mr Lloyd said: "I will listen to what people ask me to do and I will abide by that."
In the local elections last week, Mr Lloyd retained his seat on Exeter City Council.
When the controversy first broke six months ago, officials at Labour's Walworth Road HQ insisted that Mr Lloyd would remain the candidate. But as it has refused to die down - helped by an Early Day Motion in the Commons signed by 36 Tory MPs deploring Labour's choice as "yet more evidence that the party is not fit to govern" - fears grew that the right-wing tabloid press would ruthlessly exploit the disclosures and put a highly- winnable seat at risk.Reuse content