Faiza Shaheen has resigned from Labour after being blocked from standing as a candidate in the election - accusing the party of a "hierarchy of racism".
Ms Shaheen was dropped as a candidate for Chingford and Woodford Green after she allegedly liked a series of social media posts that downplayed antisemitism accusations.
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In a statement on X, she said she had been "penalised for describing my experiences of Islamophobia".
"Today, with a heavy heart, I have made a decision to resign from the Labour Party."
Ms Shaheen accused Labour of conducting a "sham process initiated for spurious reasons" in order to remove her as a candidate in the northeast London seat.
At the last election in 2019, she came second to Tory heavyweight Sir Iain Duncan Smith, losing to him by just over 1,000 votes.
However, on Tuesday the party's ruling National Executive Committee confirmed they would not be endorsing the economist and author this time around, with Brent councillor Shama Tatler chosen instead.
Ms Shaheen claimed that she has faced "a relentless campaign of unfair treatment, bullying and hostility that I have never before experienced in all my personal or professional life".
She added that the person who is replacing her is "someone not known to or supported by most local members with no links to our community".
"I have been penalised for describing my experiences of Islamophobia and been dismayed at the hierarchy of racism that exists in my own party," she said.
She concluded by saying she was deciding on her next steps and would make a further announcement on Wednesday.
Nominations for the election close on Friday, meaning Ms Shaheen could still put herself forward as an independent candidate.
A party spokesperson declined to be drawn on the claims in the letter, telling Sky News: "We are focused on electing a Labour government and delivering the change that people in Chingford and Woodford Green and across the country need."
The row comes amid accusations Labour leader Sir Keir Starmer is purging left-wing candidates.
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Last week Lloyd Russell-Moyle, the previous MP for Brighton Kemptown, was told he cannot stand after being suspended by Labour over what he called a "vexatious and politically-motivated complaint" against him.
And veteran MP Diane Abbott had also claimed she was barred from standing in Hackney North and Stoke Newington, though Sir Keir later said that was not the case following days of confusion.
Labour has since confirmed the Jeremy Corbyn ally and the UK's first black female MP is the chosen candidate in her constituency, which she has represented for 37 years.
But the handling of both Ms Abbott's and Ms Shaheen's candidacies promoted the resignation from Labour of seven of the party's councillors in Slough, who accused Labour of racism.
Asked about the resignations earlier on Tuesday, Sir Keir Starmer said there were "brilliant Labour teams out in every constituency, fighting for votes in this general election".
He said: "We're in good form, we're making a positive argument about the choice before the country."
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