Chris Williamson’s suspension from the Labour Party has been lifted following the conclusion of a disciplinary case against him.
The Derby North MP was issued with a formal warning following his comments that the party had been "too apologetic" in response to criticism over its handling of antisemitism allegations.
The Board of Deputies of British Jews said the lifting of his suspension was a disgrace.
Mr Williamson was suspended in February after video footage showed him telling a meeting of the grassroots Momentum group that Labour's reaction to antisemitism allegations had led to the party being "demonised".
The MP was also filmed saying he had celebrated the resignation of MP Joan Ryan, who quit Labour in protest over the handling of antisemitism and bullying complaints.
The suspension of the MP, a prominent supporter of Jeremy Corbyn, was lifted after a hearing of a National Executive Committee (NEC) antisemitism panel.
Veteran Labour MP Dame Margaret Hodge, who is Jewish, said: "This shows that the complaints process is a complete sham.
"This is not zero tolerance. This is letting your political pals back in and turning a blind eye to Jew-hate. Every decent Labour Party member must challenge this."
Tory leadership hopeful Boris Johnson said it was "shameful that Labour have reinstated this key Corbyn ally back into their party after his appalling remarks".
"We must never allow these apologists for anti-Semitism anywhere near government," he said.
A Labour Party spokesman said: "The Labour Party takes all complaints extremely seriously, which are investigated in line with our rules and procedures.
"We can't comment on individual cases."