Mandy Richards was recently picked by the party to fight the parliamentary seat of Worcester.
It is currently held by just 2,500 votes by Robin Walker, a Brexit minister.
But she has come under fire for a string of claims – which some people have called conspiracy theories – including that the murder of MP Jo Cox was “conveniently bereft of evidence”.
Ms Richards also questioned on Twitter after the Manchester Arena terror attack “why still no images/ footage of physical damage” of the building.
Michael Foster, the former Labour MP for Worcester, wrote on Twitter: “She cannot be @UKLabour candidate for #Worcester at the next election. We cannot gift the Tories the seat like this.”
Despite his comments being widely reported, the national party has not yet commented.
It left him tweeting: “Will someone from Labour please put a stop to this?
“Having ‘no comment’ from you is difficult to defend on local radio; to Labour members in Worcester and most importantly, to the voters in Worcester I had the privilege to serve.”
Over the weekend, The Sunday Times revealed Ms Richards was banned from bringing court actions without a judge’s permission because of “vexatious” claims against MI6, MI5, Thames Water, Hackney Council and the centrist Labour group Progress.
The High Court made 14 civil restraining orders banning her from taking further action without approval.
She reportedly claimed her allegations were dismissed “because she was a black woman”.
Despite her selection, Ms Richards could be axed as Labour’s official candidate because its ruling National Executive Committee can veto appointments.
Hitting back in a post that was initially posted on Facebook and then withdrawn from public view, the prospective candidate denied she was a “fantasist”.
She said she had discussed previous litigation cases “at length with executive officers from the Party” prior to being selected.
“I apologise to Labour party members for any consternation or upset the articles published this weekend may have caused,” Ms Richards wrote.
“I can assure you categorically all the cases brought were all above board.”
She did not mention the tweets about terrorism.
A number of people on Twitter called her selection into question, with one, fallout4fan, replying to her tweet: “Questioning evidence of the Manchester bombing?! Maybe you shouldn’t be an MP with views like that”
Another, Iain Whiteley, said on Twitter: “Why should any Labour MP have to sit next to her under a coat-of-arms knowing what vile thoughts the woman really has?”
Sky News has contacted Ms Richards for a comment.