An outspoken Liberal Democrat peer who declared that Israel would not last for ever has resigned the party whip after rejecting a call from Nick Clegg to apologise.

Lady Tonge told the leadership in a phone call that she could not accept the ultimatum from the deputy prime minister because she stood by her remarks.

Her move, which came as the Board of Deputies of British Jews condemned Tonge's remarks as "sinister and abhorrent", means she no longer takes the Lib Dem whip in the Lords.

Tonge said: "The comments I made have been taken completely out of context. They followed a very ill-tempered meeting in which Zionist campaigners attempted continually to disrupt proceedings. They mouthed obscenities at the panelists, to the extent that university security attempted to remove them from the premises.

"The comments I made were in protest at the treatment of Palestinians in Gaza and the West Bank and the treatment of Israeli Arabs.

"I am disappointed the leadership of my party did not consult me before issuing a press release and seems always to abet the request of the pro-Israel lobby. Israel is acting against international law, the Geneva conventions and human rights. They do this with impunity and if our political parties will not take action then individuals must.

"I have been asked to apologise but refuse to do so and resign the whip of my party."

Clegg said: "These remarks were wrong and offensive and do not reflect the values of the Liberal Democrats.

"I asked Baroness Tonge to withdraw her remarks and apologise for the offence she has caused. She has refused to do so and will now be leaving the party.

"The Liberal Democrats have a proud record of campaigning for the rights of Palestinians, and that will continue, but we are crystal clear in our support for a two-state solution."

The chief rabbi, Lord Sacks, said: "I am appalled at Baroness Tonge's remarks. They are dangerous, inflammatory and unacceptable. I commend Nick Clegg for his decisive action. Views such as those expressed by Baroness Tonge have no place in civil public discourse."

Tonge, who was sacked as the Lib Dem children's spokeswoman in the Commons in 2004 when she suggested she could consider becoming a suicide bomber sparked the row after raising questions about the future of Israel.

The peer told a meeting at Middlesex University last week: "Beware Israel. Israel is not going to be there for ever in its present form. One day, the United States of America will get sick of giving £70bn a year to Israel to support what I call America's aircraft carrier in the Middle East – that is Israel. One day, the American people are going to say to the Israel lobby in the USA: enough is enough."

She added: "Israel will lose support and then they will reap what they have sown."

A Lib Dem spokesman said: "Jenny Tonge does not speak for the party on Israel and Palestine. Her presence and comments at this event were extremely ill-advised and ill-judged. The tone of the debate at this event was wholly unacceptable and adds nothing to the peace process. The Liberal Democrats are wholehearted supporters of a peaceful two-state solution to the Israel-Palestine issue."

The Liberal Democrats Friends of Israel said: "LDFI applaud Nick Clegg's decisive action in sacking Baroness Jenny Tonge. Nick rightly gave Jenny Tonge the chance to apologise and retract her recent statement on Israel and she declined. The rest is history. I hope this now draws a line under the continual smearing of Lib Dem party policy on Israel and the Middle East by former Lib Dem Baroness Tonge. I'm pleased to say she is now somebody else's problem."

The Board of Deputies of British Jews had condemned her remarks. In a statement issued before Tonge's resignation, the chief executive, Jon Benjamin, said: "Given her longstanding, pernicious views on Israel, her comment that Israel 'is not going to be there forever' is both sinister and abhorrent. There is no place for someone like Jenny Tonge in mainstream political parties in this country and it is time for the Liberal Democrats to act quickly and decisively, once and for all."

John Woodcock MP, the chairman of Labour Friends of Israel, said: "This is the latest in a series of outrageous remarks from Baroness Tonge – words of excuse or apology in response are no longer enough."

Tonge's remarks were made last week and disclosed on the Guido Fawkes website.