Fairfax revealed last week that Mr Palmer had sought to soothe concerns of Muslim leaders under threat of an electoral backlash at upcoming state polls. He asked leaders to give him a fortnight to rein in Ms Lambie.

"Party policy is determined by a meeting of the members and is announced by the leader," he said.

"When it comes to sharia law, to me, it obviously involves terrorism," she said.

But Senator Lambie's refusal to back down has stoked speculation she could quit PUP and become an independent and that she is taking advice from her senior aide, Rob Messenger, ahead of the PUP leader.

Mr Messenger, a former Queensland state MP who resigned from the LNP in 2010 to become an independent, has landed in hot water himself over a perceived anti-Muslim bias.

Last year, Queensland Minister for Multicultural Affairs Glen Elmes called on Mr Palmer to sack Mr Messenger from standing as a PUP candidate, after he urged against "appeasement" of Islamic terrorists he said were living in our midst "sustained by our welfare payments".

In a letter to the editor printed in a regional Queensland newspaper, he wrote: "There was a time in the 1930s in Germany when the Nazis were hounded from villages in a shower of rocks and curses. There was a time when the German people could have emphatically said "No" to the Nazis' special message of hate and crazy.

"We are living in similar times and face a similar evil. And the world will suffer a similar fate as the generation of 1930s and '40s, if we do not loudly condemn the leaders and followers of the extremist Islamic religious ideology driving this current world madness."