Lord Levy, a former fundraiser under Tony Blair, said racism against Jewish people should not be tolerated in the Labour party.
“It’s absolutely crucial that the leadership of the party stamp this out once and for all,” he told the BBC’s Newsnight programme.
“There can be criticism of the state of Israel, but anti-Semitism – using the word Zionists as another form of anti-Semitism frankly can no longer be tolerated.”
The warning comes as Labour MP Naz Shah is suspended by her party after comments emerged that she had suggested Israel should be moved to North America.
Critics highlighted the use of the words “transportation” and “solution” in the MP’s historic Facebook post, and said the suggestion was anti-Semitic.
Ms Shah apologised immediately for the post, which was made before she became an MP.
But Ken Livingstone said Ms Shah’s remarks were not anti-Semitic and that some people were eliding criticism of Israel with attacks Jewish people.
“We expelled a couple of people from the Labour Party early on for saying things that could clearly be interpreted as anti-Semitic,” he said.
“This is not that; this is an over-the-top comment about the horrendous conflict between the Israelis and the Palestinians.”
Ms Shah stepped down as an aide to John McDonnell over her remarks.
After the latest row Labour officials have said they are drawing up guidelines regarding what constitutes anti-Semitism and when members should be expelled.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies