The US-based Simon Wiesenthal Center launched a scathing attack on Mahathir Muhammad on Tuesday after he branded Jews "arrogant" and accused them of controlling the world by proxy.
The centre called on investors and tourists to avoid Malaysia until it became clear the leaders who follow him after he retires on 31 October do not share his views.
"It cannot be business as usual as long as the head of Malaysia continues to validate the ugly racist hate of anti-Semitism that invites anti-Jewish hate crimes and terrorism," said the centre's Rabbi Abraham Cooper.
"It cannot be business as usual as long as the head of Malaysia continues to validate the ugly racist hate of anti-Semitism that invites anti-Jewish hate crimes and terrorism"
Rabbi Abraham Cooper,
Simon Wiesenthal Center
"Mahathir's serial anti-Semitism has now moved the most virulent anti-Semitic stereotypes into the mainstream of the body-politic of the Islamic and Asian communities," he added.
Cooper also accused the world community, with the exception of the United States, of meeting Mahathir's remarks with "silent indifference and in the case of the recent OIC Summit, standing ovations".
US President George Bush pulled the veteran leader aside at the APEC leaders' conference in Bangkok to bluntly denounce his "wrong and divisive" charge, which was dismissed by the US as "hateful".
But the characteristically outspoken Mahathir was unrepentent in an interview with the Bangkok Post on Tuesday.
He said: "In my speech I condemned all violence... and I told the Muslims it's about time we stopped all these things and paused to think and do something that is much more productive.
"That was the whole tone of my speech, but they picked up one sentence where I said that the Jews control the world.''
"The reaction of the world shows that they [Jews] do control the world''
Malaysian prime minister
Dr Mahathir added, however, that "the reaction of the world shows that they [Jews] do control the world''.
During his speech at the Organisation of Islamic Conference in Malaysia last week, Dr Mahathir said Jewish people, because of their ties with the United States, had an influence which far outweighed their numbers.
"It cannot be that there is no other way - 1.3 billion Muslims cannot be defeated by a few million Jews,'' he said.