Foreign Secretary Jeremy Hunt's jibe likening the EU to the Soviet Union was "as unwise as it is insulting", the president of the European Council says.
Donald Tusk called for "respect", saying as someone who spent half his life in the Soviet bloc: "I know what I am talking about."
Asked if Mr Hunt, who made the comments at the Tory conference, should resign, he replied: "That's not my problem."
He also said a Canada-style free trade deal with the EU remained on the table.
Addressing Conservatives at the party conference in Birmingham, Mr Hunt accused the EU of seeking to punish the UK in order to "keep the club together".
His speech recalled a visit to Latvia earlier this summer and the role that the UK and others played in helping it transition from Soviet rule to becoming a modern democracy and market economy.
"What happened to the confidence and ideals of the European dream?" he asked.
"The EU was set up to protect freedom. It was the Soviet Union that stopped people leaving."
He has since faced calls to apologise from several EU ambassadors.
At a press briefing in Brussels, Mr Tusk - the former prime minister of Poland - said: "In respecting our partners, we expect the same in return.
"Comparing the EU to the Soviet Union is as unwise as it is insulting.
"The Soviet Union was about prisons and gulags, borders and walls, violence against citizens and neighbours.
"The European Union is about freedom and human rights, prosperity and peace, life without fear, it is about democracy and pluralism - a continent without internal borders and walls.
"As the president of the European Council and someone who spent half his life in the Soviet bloc, I know what I am talking about."
At last month's EU summit in Salzburg, Mr Tusk rejected Theresa May's Brexit proposals and sparked anger among some Tories with an Instagram post apparently poking fun at the prime minister and suggesting she was "cherry picking".
The day after the summit Mrs May called for "respect" from the EU towards the UK side.
Mr Tusk - after his criticism of Mr Hunt's comments and his own call for respect to be shown - added: "Telling the truth, even if difficult and unpleasant, is the best way of showing respect for partners, that's how it was in Salzburg and that's also how it will work in the coming days."
He added: "Emotional arguments that stress the issue of dignity sound attractive but they do not facilitate agreement."
The UK is due to leave the EU in March, but the two sides have not yet reached a deal on how this will work.
Mr Tusk said that now the Conservative Party conference had ended, "we should get down to business".
And in a remark that was welcomed by some Eurosceptics who want to scrap Mrs May's proposed trade plans, he said the EU remained open to a "Canada plus plus plus" deal - a reference to the EU's free trade deal with Canada.
This would be "much further reaching on trade, on internal security and on foreign policy co-operation" than Canada's arrangement, he said.
Former Brexit Secretary David Davis said: "This shows clearly that No 10's claim that 'there is no alternative to Chequers' is just wrong."
And former Foreign Secretary Boris Johnson tweeted:
Tusk’s Canada +++ offer shows there is a superb way forward that can solve the Irish border problem and deliver a free trade based partnership that works well for both sides of the channel - as I set out last week in my plan for a better brexit https://t.co/qSxC4nnReR— Boris Johnson (@BorisJohnson) October 4, 2018
But Mrs May has said a deal like Canada's would not prevent a visible, physical border being needed in Northern Ireland - a key commitment of both sides - because of the extra checks that would be needed on goods.
The EU has proposed a "backstop" plan to keep the border open - under which Northern Ireland would remain aligned to some EU rules.
But this has been rejected by Mrs May who says the arrangement would carve up the UK and create a new border in the Irish sea.
Irish PM Mr Varadkar said that it could take longer than the length of the post-Brexit transition period, due to run to 31 December 2020, to agree a final EU-UK trade deal.
"What I do know is that we need a backstop, a protocol on Ireland and N Ireland as part of a withdrawal agreement," he said.
However, he added: "I think we are entering a critical and decisive stage of these negotiations and there is a good opportunity to clinch a deal over the next couple of weeks."
UK ministers have suggested new proposals for a border backstop are being prepared.
BBC political editor Laura Kuenssberg said UK officials were understood to be working on plans for a "hybrid backstop" with light-touch regulatory checks between Great Britain and Northern Ireland, the possibility of some kind of democratic oversight from Stormont and a temporary extension of the customs union to the whole of the UK in the event that a free trade deal has not been completed.
There is no official confirmation of the plans or when the proposals will be presented to the EU, she added.
The deputy leader of Northern Ireland's Democratic Unionist Party, Nigel Dodds, told the BBC his party could not accept a "separate hybrid model" in which Northern Ireland is in the EU single market but out of its customs union.
And asked about the prospect of "light touch regulatory checks" between Great Britain and Northern Ireland, Mr Dodds asked why such techniques could not be used on the land frontier in Ireland.