Chris Williamson has been allowed back into the Labour Party four months after he was suspended in an anti-Semitism row.
The MP and Jeremy Corbyn ally will once again sit with the party after he was issued with a "formal warning" by a disciplinary panel.
The Derby North MP and former shadow minister by suggesting Labour had been "too apologetic" over anti-Semitism.
His reinstatement comes in time for MPs to tell the party if they want to stand as Labour candidates at the next election, as the party steps up general election prep.
In a video clip of a Momentum meeting, leaked to the Yorkshire Post, Mr Williamson said: "We have backed off far too much, we have given too much ground, we have been too apologetic."
Labour sources confirmed Mr Williamson is no longer suspended after his case was considered by an anti-Semitism panel of Labour's ruling National Executive Committee.
His case was not considered by Labour's highest discipline body, the National Constitutional Committee.
Party sources said the panel was advised by independent barristers and Mr Williamson is likely to face more severe sanctions, including an NCC hearing, if he repeats such conduct in future.
The Jewish Labour Movement reacted furiously to the news.
JLM's National Chair Mike Katz said: "How dare the Labour Party deny it is institutionally racist against Jews when it decides to take no action against Chris Williamson?
"It seems the decision to let him off is because he represents a margnial seat and there might be a snap election. It's good to know that a Party of anti-racists, led by an avowed anti-racist decides its OK to ignore anti-Jewish racism if there's a vote to be won.
"This decision stinks and shows the moral terpitude the Party finds itself in."
Outspoken Labour moderate Stella Creasy MP tweeted: "The decision to let Chris Williamson back into party in time for him to stand again as a labour candidate is best example yet of why we need an independent process for anti Semitism and sexual harassment complaints and not mates rates ... #EnoughIsEnough"
Even Tory leadership contender Boris Johnson weighed in.
Boris Johnson tweeted: "Shameful that Labour have reinstated this key Corbyn ally back into their party after his appalling remarks. We must never allow these apologists for anti-Semitism anywhere near government."
A Labour Party spokesman said: "The Labour Party takes all complaints extremely seriously, which are investigated in line with our rules and procedures.
"We can’t comment on individual cases."
