A Muslim MP says her faith was raised by a government whip as a reason why she was sacked as a minister in 2020.
According to the Sunday Times, Tory Nusrat Ghani said that when she asked for an explanation it was stated her "Muslimness was raised as an issue".
Conservative Chief Whip Mark Spencer said Ms Ghani was referring to him and added her claims were completely false and he considered them defamatory.
No 10 said the PM had previously met with Ms Ghani to discuss her concerns.
A spokesperson said Boris Johnson "then wrote to her expressing his serious concern and inviting her to begin a formal complaint process. She did not subsequently do so. The Conservative Party does not tolerate prejudice or discrimination of any kind".
In response, Ms Ghani said Mr Johnson "wrote to me that he could not get involved and suggested I use the internal Conservative Party complaint process".
She said she did not do this because it was "very clearly not appropriate for something that happened on government business".
"I do not even know if the words that were conveyed to me about what was said in reshuffle meetings at Downing Street were by members of the Conservative Party," she added.
"All I have ever wanted was for his government to take this seriously, investigate properly and ensure no other colleague has to endure this."
Ms Ghani was appointed to a post at the Department for Transport in 2018, becoming the first female Muslim minister to speak in the Commons.
She lost that job in a mini-reshuffle of Mr Johnson's government in February 2020.
Speaking to the Sunday Times, Ms Ghani said that when she asked for an explanation, a government whip had told her that "Muslimness was raised as an issue" during discussions about the reshuffle, and her status as a "Muslim woman... was making colleagues uncomfortable".
The Wealden MP is quoted as saying she dropped the matter after being told that if she "persisted" in asking about it she "would be ostracised and her career and reputation would be destroyed".
"I raised it several more times through official party channels.... I was extremely careful to follow procedure, and when the procedure ran out of road I had no choice but to get on with my career."
Speaking to the BBC's Sunday Morning programme, Justice Secretary Dominic Raab said her allegations were "very serious" but there would not be a formal investigation unless Ms Ghani made a formal complaint.
On Saturday night, Mr Spencer, in a series of tweets, identified himself as the person Ms Ghani's claims were made about.
He said the accusations were "completely false and defamatory" and denied ever using the words Ms Ghani had alleged.
Mr Spencer went on to say it was "disappointing" that at the time she had declined to refer the matter for a formal Conservative Party investigation.
He said he had previously provided evidence to the Singh investigation - which examined how the Conservative Party dealt with discrimination complaints.
Initially Mr Spencer said the investigation "concluded there was no credible basis for the claims", but later rewrote the post adding the words "to be included in the report" to the end of the sentence.
Prof Singh's 2021 report found that while "not systemic" there was "evidence of discrimination" in the Conservative Party, and it called for the complaints process to be overhauled.
In a tweet, Nadhim Zahawi, the education secretary, said there was "no place for Islamophobia or any form of racism" in the Conservative Party, adding that the allegations had to be "investigated properly and racism routed out".
Health Secretary Sajid Javid also said the matter needed "a proper investigation" and that he would support Ms Ghani "in making a formal complaint". "She must be heard," he added.
Lord Sheikh, president of Conservative Muslim Forum, said he was "very disturbed" by what Ms Ghani had said.
"Somebody is not telling the truth. I would like to get to the bottom of this. I'd like an investigation to be carried out by an independent person," he added.
BBC political correspondent Damian Grammaticas said the very public airing of this dispute was a sign of serious tensions among Tories ahead of a crucial week for Boris Johnson.
Civil servant Sue Gray is due to complete her inquiry into parties held on government premises during the coronavirus lockdowns.
It has been reported that Ms Gray is now also looking into gatherings held at Mr Johnson's private Downing Street flat.
Mr Raab said the substance of the findings would be published but could not say if the full report would be made public.
Some Conservative MPs have called on Mr Johnson to resign over the revelations, and one member, William Wragg, complained about the government tactics used against MPs seeking to oust the prime minister.
Mr Wragg said No 10 had tried to "blackmail" some MPs and he would be meeting with police to discuss the allegations, but Downing Street said it had not see any proof of such behaviour.
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