Theresa May has been accused of "burying her head in the sand" over Islamophobia in the Conservative Party.
Former party chairwoman Baroness Warsi said the PM had failed to "acknowledge" or "tackle" the problem and this was "symptomatic" of her wider leadership.
Shortly after her comments, the party said 14 members had been suspended for Islamophobic Facebook posts.
The Conservatives said "decisive action" would be taken against anyone making offensive remarks.
The suspensions followed messages posted on a Facebook group called the "Jacob Rees-Mogg Supporters Group".
The page was not affiliated with the MP or the party as a whole but Conservative members identified as using it have been suspended pending an investigation.
"When we find evidence of members making offensive or inappropriate comments, we consistently take decisive action," a spokesman said.
But Baroness Warsi, who was the UK's first female Muslim cabinet minister, has said her party had "turned a blind eye" to prejudice and become "institutionally Islamophobic".
She suggested the "rot had set in" several years ago and accused senior party officials of being "in denial" and presiding over an "opaque" complaints process.
In a personal attack on the prime minister, she said Mrs May had "failed to tackle the problem head on".
"She doesn't listen, she fails to acknowledge when there is a problem. It's probably symptomatic of the way in which her leadership has dealt with other matters.
"Burying your head in the sand is not going to make problems go away."
She said efforts to modernise the party had "gone into reverse" since Mrs May succeeded David Cameron as leader, but she ruled out quitting the party, as others have done.
"If my party's going though a process of 're-UKIPification' of itself, then it's my job to stand within that party and fight to bring it back to the centre ground."
She has written to the party's chief executive Sir Mick Davis urging him to "show leadership" on the issue, because, she said, Mrs May and party chairman Brandon Lewis had not.
She said Sir Mick, a former chairman of the Jewish Leadership Council, had a "long history of fighting bigotry" and was "uniquely placed to understand consequences of unchecked hate".
Baroness Warsi has been warning about anti-Muslim prejudice in the party for years.
Her latest intervention follows a row over former candidate Peter Lamb, who was was due to stand in the Staple Tye ward, in Harlow, Essex, in May's local elections and had previously stood in the Toddbrook ward.
Mr Lamb was disciplined by the party after it emerged that he had posted a message on Twitter in 2015, saying "Islam like alcoholism [sic]" and "the first step to recovery is admit you have a problem".
Later in the same year, he tweeted: "Turkey buys oil from ISIS. Muslims sticking together," adding: "Do they want us to call ISIS Daesh now so that we don't associate them with Islam?"
Mr Lamb was reinstated as a candidate but local party sources said he had quit the party earlier on Tuesday, following the row about his comments.
'Party in denial'
In a statement on Twitter, he apologised for the remarks, saying they were "aimed at the extremists that have hijacked Islam and are cowardly hiding behind the religion".
Justice Secretary David Gauke rejected suggestions the party had ignored warnings on the issue.
"Where there is evidence, we take action, as a political party should.
"Whether it is Islamophobia or whether it is anti-Semitism, there is an obligation on political parties to take action and address it.
"That is what the Conservative Party does and will continue to do. So I don't accept that criticism."
But the Muslim Council of Britain said the level of prejudice within the party was "astonishing" and the claims should be independently investigated.
"We've seen MPs, councillors and members engage in bigotry that should have no place in a modern Conservative Party," a spokesman said.
"Yet the constructive call by Muslim communities for an independent inquiry into the issue has been ignored again and again. Instead we hear excuses, denials and the responses we would expect when there is an institutional problem."