According to the Sunday Telegraph, chairman Ian McCartney compared Oliver Letwin, the opposition Conservatives' finance spokesman, to the Jewish villain in Charles Dickens's 19th century novel Oliver Twist.
McCartney's speech meant to rally Scottish Labour deputies at their annual conference certainly caused a stir.
During an attack on opposition Conservative Party spending plans, McCartney also lampooned Letwin, the descendant of Jewish refugees from Ukraine, as Slasher Letwin.
"What would life under Slasher Letwin look like? No Oliver Twist, this man is more of a Fagin."
One Jewish leader, Rabbi Jonathan Romain of Maidenhead Synagogue, took particular offence at the chairman's caricature.
"I find the remark highly offensive. It is a throwback to the worst kind of stereotype from a bygone age.
"It is totally gratuitous to compare someone to a fictitious Jewish villain from 1837. Consciously or otherwise it is a reference to Mr Letwin's face rather than his politics."
"What would life under Slasher Letwin look like? No Oliver Twist, this man is more of a Fagin"
But McCartney said in a statement that it was "absolute nonsense" to say his scripted remarks were racist.
"I have spent all my life campaigning against racism and anti-Semitism. No one who reads the remarks in context could interpret them in that way."
However, a UK poll last month suggested that anti-Jewish sentiment was rising.
One poll showed that 20% of British people would not elect a Jewish prime minister, 14% that the Holocaust had been exaggerated, and 19% that Jews had too much influence.