The party's deputy leader has said there is evidence "a small group of Trotskyite activists have taken leading roles" in the party
Jeremy Corbyn has attacked his deputy Tom Watson after he said "Trotsky entryists" were manipulating young party members to boost support for the Labour leader.
Their relationship erupted into a war of words last week with allies of Mr Corbyn accusing Mr Watson of peddling "baseless conspiracy theories".
The deputy leader replied with a dossier which he claimed backed up his comments.
But Mr Corbyn has now personally accused Mr Watson of talking "nonsense" as his battle with Owen Smith for the Labour leadership grows increasingly tense.
In an interview with the Observer, he said of Mr Watson: "I read about his letter to me in the media.
"It appeared to be a rehash of a book (journalist) Michael Crick wrote 20 years ago about alleged entryism into the Labour Party at that stage.
"I just ask Tom to do the maths - 300,000 people have joined the Labour Party.
"At no stage in anyone's most vivid imagination are there 300,000 sectarian extremists at large in the country who have suddenly descended on the Labour Party."
Mr Corbyn added: "Sorry Tom, it is nonsense. Let's get on with campaigning Tom. Thanks."
Mr Watson hit back, insisting the evidence was "incontrovertible".
He told the newspaper: "The overwhelming majority of new members joined the Labour Party because they want to build a fairer and more equal society.
"But there is clear and incontrovertible evidence that a small group of Trotskyite activists have taken leading roles in the Labour Party or are seeking to do so.
"They are also explicitly targeting Young Labour and Labour student clubs with the aim of recruiting new members. That is beyond dispute. We can't deal with this problem until we acknowledge it exists."
Mr Corbyn also spoke for the first time about the British court of appeal upholding a decision by Labour's ruling body to bar around 130,000 new members from voting in the leadership contest.
He said: "People joined the Labour Party in order to take part in the party and were specifically told that they were able to vote in the leadership election and it was decided by the High Court that they could.
"The Appeal Court has said they can't and I would imagine that those who brought the case will be considering whether or not to take it to the Supreme Court."