South Yorkshire Labour peer Lord Ahmed has been suspended by the party over reports he offered a £10 million bounty for the capture of US president Barack Obama.
Lord Ahmed, from Rotherham, who denies the allegation, is quoted in a newspaper in Pakistan offering cash for the capture of Mr Obama and White House predecessor George Bush.
He is alleged to have made the comments at a reception in Haripur on Friday.
The Express Tribune said he spoke out in direct response to a US reward offered for the capture of prominent Pakistani radical Hafiz Muhammad Saeed, who founded extremist group Lashkar-e-Taiba, blamed by India for the 2008 Mumbai terror attacks in which 166 people were killed.
Labour has suspended the peer, pending an investigation.
“If these comments are accurate we utterly condemn these remarks which are totally unacceptable,” a spokeswoman said.
But Lord Ahmed said: “I never said those words. I did not offer a bounty. I said that there have been war crimes committed in Iraq and Afghanistan and those people who have got strong allegations against them - George W Bush and Tony Blair have been involved in illegal wars and should be brought to justice.
“I do not think there’s anything wrong with that. If the Labour Party want to suspend me I will deal with the Labour Party. They will have to give me some evidence.”