Labour's Emily Thornberry says she has begun legal action against a former colleague who claimed that she called some Leave voters "stupid".
She said Caroline Flint's claim she had told an MP from a Leave-voting area "I am glad my constituents aren't as stupid as yours" was "a complete lie".
Ms Flint, who lost her seat at the election, has stood by her remarks.
The row comes amid recriminations over Labour's defeat and early manoeuvring to succeed Jeremy Corbyn as leader.
Mr Corbyn has said he will stand down "early next year" after leading the party to its worst electoral defeat since 1935.
Ms Thornberry, the re-elected MP for Islington South, is expected to be one of the candidates vying to succeed him. But she is now embroiled in a bitter row with Ms Flint, who lost her Don Valley seat to the Conservatives on Friday,
The former minister said Ms Thornberry and other supporters of another Brexit referendum in the party should shoulder much of the blame for the loss of so many Leave-voting seats in the Midlands and north of England to the Conservatives.
Ms Flint has been a longstanding critic of the party's Brexit strategy and was one of 19 Labour MPs to back Boris Johnson's deal in principle when it came before Parliament before the election.
'Never think it'
Ms Thornberry said she completely denied using the words Ms Flint had attributed to her.
"I would never even think that, let alone say it," she told the BBC. "It is a complete lie."
"I've said to Caroline 'come on this isn't true, you know withdraw it and I'll give you to until the end of the day and she refuses to so I've had to go through all the hassle of instructing solicitors and we are having to take legal action."
The BBC's political correspondent Iain Watson said the spat between two of Labour's most prominent female politicians was a sign of how bitter the forthcoming leadership battle was likely to become.
Some MPs have said Labour's rout in its traditional heartlands meant it had to completely rethink its approach to winning back voters in Leave areas, and that the next leader should not come from London, which voted overwhelmingly to remain.
Ms Flint has said the only two candidates that should be in the frame to be the next leader are Lisa Nandy, the Wigan MP who also backed the PM's deal in October, and Rebecca Long-Bailey, the MP for Salford and Eccles, who is close to the current leadership.
Iain Watson said Ms Thornberry knew that unless she robustly challenged Ms Flint's accusation, then her leadership bid would be dead before it was formally declared
There have been unconfirmed reports that Ms Long-Bailey and Angela Rayner, another potential candidate, could stand on a "joint ticket" in which the latter stands for the vacant deputy leader position and backs Ms Long-Bailey for the top job.
And the BBC understands that Birmingham MP Jess Philips will be announcing her leadership bid relatively soon. Over the weekend, she encouraged people to "join Labour in order to change Labour".
Ilford MP Wes Streeting said there should be a wide field of candidates and the likes of Ms Thornberry and Sir Keir Starmer - the shadow Brexit secretary who represents a London constituency - should not be ruled out because of their views on Brexit.
"You know there's been a sort of knee-capping exercise by people sort of saying 'this is all Remain's fault' when it's not, I don't think it's true' I just think we've got to get onto the terrain of ideas rather than personalities."