Hayes and Harlington MP John McDonnell, who has become embroiled in a row over the comments, says his words were misrepresented.
The Labour MP made the remarks at a Remembrance Sunday event – an 'anti-war comedy night' – at a club in Covent Garden.
MailOnline, the Daily Mail's website, said Mr McDonnell's comments about a visit to Miss McVey's Wirral West constituency, where she faces a union-backed campaign to oust her from her seat, were met with applause.
The website reported that in his speech, Mr McDonnell said: “I was up in Liverpool a fortnight ago, where Alec McFadden, one of our [union] organisers, launched the Sack Esther McVey Day on her birthday.
“I spoke at a packed public meeting... there was a whole group in the audience that completely kicked off quite critical of the whole concept, because they were arguing, 'Why are [we] sacking her? Why aren’t we lynching the bastard?”’
Today, Mr McDonnell said: “Don’t blame me for simply reporting what Esther McVey’s constituents have said at a public meeting. I wear any attack by the once Hitler supporting Daily Mail as a badge of honour.”
The Mail's story, which has since circulated elsewhere on the internet, appears to have been sparked by a letter from Conservative party chairman Grant Shapps, written to Labour leader Ed Miliband.
Mr McDonnell today said Mr Shapps had claimed in the letter that he had 'advocated' lynching the welfare minister, when in fact he had been repeating comments made by one of her constituents, as the Mail reported.
In a letter replying to Mr Shapps, Mr McDonnell wrote: “I have read the letter from you to Mr Miliband today, which has appeared on websites and appears to have been circulated to the media.
"You claim in this letter that I 'advocated the lynching of welfare minister Esther McVey.'
"In the next paragraph you write ‘"Why aren’t we lynching the bastard?" he asked the audience. This is a sickening demand – in public – for a violent attack on a female Member of Parliament.'
"This is absolutely untrue.
"I am writing therefore to ask that you withdraw these allegations.
"If you had cared to check your facts you will have known that I was reporting what had been said at a meeting in Ms McVey’s constituency by her own constituents, nothing more."
Conservative MPs have called for Mr McDonnell to have the Labour whip withdrawn.
Pearl Lewis, Conservative prospective parliamentary candidate for Hayes and Harlington, today echoed those calls and branded Mr McDonnell a 'dinosaur'.
She said: "I am shocked, sickened and dismayed that someone who claims to represent the people of Hayes and Harlington would make such comments.
"There are far too many women in the political world without this socialist dinosaur belittling the efforts of those who serve in government.
"The Labour Party must act, and remove the whip immediately until he apologises unreservedly for his vile and threatening words."
Mr McDonnell's comments, which were made as the nation remembered those who died serving their country, come after he slammed Hillingdon Council for 'neglecting' poppies planted to commemorate the First World War's centenary.
The comedy night was held in tribute to Labour anti-war campaigner Tony Benn, who died in March aged 88.