Mr Ali was recorded suggesting in a meeting of the Lancashire Labour Party that Israel had allowed the October 7 Hamas assault as a pretext to invade Gaza.
A Labour Party spokesperson said: “Following new information about further comments made by Azhar Ali coming to light today, the Labour party has withdrawn its support for Azhar Ali as our candidate in the Rochdale by-election.
“Keir Starmer has changed Labour so that it is unrecognisible from the party of 2019.
“We understand that these are highly unusual circumstances but it is vital that any candidate put forward by Labour fully represents its aims and values.
“Given that nominations have now closed Azhar Ali cannot be replaced as the candidate.”
It is too late for Labour to withdraw Mr Ali as their candidate and replace him with someone else as the deadline passed on February 2.
It is understood that Mr Ali has been suspended from the Labour party pending an investigation.
Labour faced intense pressure since the remarks surfaced, with widespread condemnation from party members and political rivals.
Mr Ali is alleged to have told a meeting of the Lancashire Labour Party: “The Egyptians are saying that they warned Israel 10 days earlier… Americans warned them a day before [that] there’s something happening…
“They deliberately took the security off, they allowed… that massacre that gives them the green light to do whatever they bloody want.”
After the Mail on Sunday published details of the recording, Mr Ali issued an apology stating that October 7 had been “the greatest loss of Jewish life in a single day since the Holocaust, and Jews in the UK and across the world are living in fear of rising antisemitism”.
A spokesperson for Campaign Against Antisemitism said: “Sir Keir Starmer has blotted an otherwise fairly admirable copy book and given the public reason to doubt the earnestness of his promise to tear antisemitism out ‘by its roots’ in Labour.
“People will have to judge for themselves whether the additional reported comments by Azhar Ali are really any worse than the comments that had already been reported.
“Rather than appearing as a principled decision, Labour’s withdrawal of support for its candidate at this late stage just looks as expedient as the failed attempt to defend him.
“It is the worst of all worlds for Labour.”
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