Labour Councillor Mohammed Pappu has been suspended from the party and his committee positions after being challenged by The Times newspaper over posts he shared on Facebook that promoted anti-Semitic conspiracy theories.
The posts claimed Israel was responsible for the London and Paris terrorist attacks and that the purpose of the war in Syria was to install a Rothschild Bank.
Pappu was in charge of grants scrutiny at the council, receiving an additional £19,000 on top of his basic allowance.
Local Liberal Democrats have condemned the revelations and are calling for Cllr Pappu, still sitting as an independent, to resign and allow residents to elect a new councillor.
A Jewish Lib Dem member of the local party who also serves as co-Chair of the Prevent Advisory Board has formally requested a meeting of the Tensions Monitoring Group to address local concerns.
Rabina Khan, Liberal Democrat councillor for Shadwell said:
"It beggars belief that the council unanimously voted to adopt the international standard definition of antisemitism at their last meeting while one of their councillors was posting content that clearly spread anti-Semitic sentiment.
Labour have failed to properly address bigotry within their party in allowing candidates with these views to stand and hold positions of responsibility. We shall see whether further revelations emerge in the coming months.
Our residents deserve better than this and deserve the right to elect a new councillor."
Elaine Bagshaw, the party's Mayoral candidate in 2018 commented:
"This shows extraordinarily poor judgement on the part of John Biggs. It's almost a joke in bad taste that this person was given a position in charge of scrutiny when there had clearly been a complete failure of scrutiny when he was chosen for the position and as a candidate.
Under Labour's administration, our children's services are still not judged to be adequate and it adds insult to injury that our own councillors are influencing young people with divisive and false claims that puts them more at risk."
Stephen Clarke, who stood for the Liberal Democrats in Blackwall and Cubitt Town added:
"The people of Blackwall and Cubitt are entitled to a hard-working local councillor, not one that spreads misinformation and community division. They deserve better than this.
Sheffield has been stuck with an inactive zombie MP after Labour threw out Jared O'Mara. The same will happen here unless we allow residents to elect a new councillor to represent them."
Abdul Asad, a former independent councillor of 28 years who joined the Liberal Democrats in September said:
"Tower Hamlets needs councillors who are able to stand up for all the people. It is sad but not surprising to read about the actions of Cllr Pappu and we shall see whether further revelations come to light in the coming weeks and months.
For now, the only respectable course of action is for Pappu to resign."