Jeremy Corbyn says he is investigating reports that a member of his shadow cabinet sang a changed version of Beatles track 'Hey Jude' on a day out – changing the lyrics to 'Hey Jews'.
The Labour Party leader branded it an "awful story" and said it was "totally unacceptable" if true.
Shadow international development secretary Dan Carden has rubbished the allegation.
A report by Buzzfeed has sparked widespread anger, with the Labour Party under intense scrutiny over its record on anti-semitism.
It is claimed that Carden changed the lyrics on a private bus to London from the Cheltenham races in March last year.
Mr Corbyn said it was an "awful story" and "totally unacceptable" if true.
Asked about the reports on a visit to Leeds, Mr Corbyn said: "Dan Carden has emphatically denied that.
"It is an awful story and if it's true it is utterly and totally unacceptable. I am looking into it."
BuzzFeed reporter Alex Wickham, who said he witnessed it, wrote that other MPs, including a number of Labour politicians, were on the bus.
He wrote: "When the chorus reached the word 'Jude', Carden chanted at the top of his voice: 'Jews, Jews, Jews'."
Mr Carden, who is seeking to be re-elected as MP for Liverpool Walton, tweeted: "I have been categorical in my denial about allegations relating to a coach trip some twenty months ago.
"This was a coach full of journalists and MPs. If anyone genuinely believed any anti-Semitic behaviour had taken place, they would've had a moral responsibility to report it immediately.
"Yet this allegation is only made now when a General Election is imminent.
"I stand by my record as an anti-racist campaigner. I would never be part of any behaviour that undermines my commitment to fighting racism in all its forms."
A spokesman for the MP told Buzzfeed: "As a homosexual man he would never intentionally engage in homophobic, racist or anti-Semitic behaviour.
"Had there been genuine concerns as to Daniel’s behaviour then those concerns should have been raised at the time rather than some 20 months later on the eve of a general election."
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