Labour has ended its disciplinary action against the MP Margaret Hodge, launched by the party after she called Jeremy Corbyn “an antisemite and a racist” over his handling of Labour’s dispute with Jewish community leaders.

Hodge was informed that she was under investigation after confronting Corbyn in the House of Commons, shortly after the party introduced a new code of conduct on antisemitism that was criticised by several Jewish groups.

The code adopted the International Holocaust Remembrance Alliance definition of antisemitism, but excluded several examples that Jewish groups had called for the party to accept in full.

Labour sources said Hodge, the MP for Barking, had “expressed regret” to the party’s chief whip, Nick Brown, “for the manner in which she raised her views”.

Hodge denied doing so, tweeting on Monday: “Just to be clear: there have been no apologies – on either side.”

In a letter addressed to Labour’s general secretary, Jennie Formby, and released on Monday, Hodge’s lawyers, Mishcon de Reya, wrote: “She [Hodge] did not express regret – in those words or any others ... Our client will not apologise for her conduct or words, as she did nothing wrong.”

Senior Labour MPs, including the shadow chancellor, John McDonnell, had previously expressed discomfort with the investigation.

On Monday, Formby wrote to Hodge to close the investigation, informing her that there would be no further action.

Hodge said in a statement: “I’m pleased that the Labour party has finally dropped their ‘action’ against me. After 55 years of LP membership, going after me instead of addressing the issue was wrong.

“In 2018, antisemitism has again reared its ugly head and the campaign against it goes on. The Labour party must adopt the IHRA definition in full to start to rebuild trust. Thanks to everyone for kind messages of support which have kept me going.”

Hodge had threatened legal action against Labour if it pursued disciplinary action. In a letter from the law firm Mishcon de Reya, her representatives accused the party of failing to set out the allegation against the MP or the rule that had been breached, calling it “hasty and ill-thought out disciplinary action … the result of which appears to be predetermined”.

The coverage meant there has been “ongoing and serious abuse being levelled against our client … This abuse should not be allowed to fester and multiply”, the letter read.

Senior Labour frontbenchers had cautioned against pursuing action against Hodge, who was on the frontline of the party’s struggles against the BNP in her seat at previous elections. McDonnell said Hodge and the party should “stand back, resolve this amicably and move on”.

The Labour deputy leader, Tom Watson, had also called for the party to end its investigation into Hodge and Ian Austin, another MP. “I think it is very important that we all work to de-escalate this disagreement, and I think it starts with dropping the investigations into Margaret Hodge and Ian Austin,” he told the Observer.

Austin is still being investigated by the party, the Guardian understands. The Dudley North MP was sent a letter earlier this month from the party’s head office warning that he was being investigated for “abusive conduct” in parliament after a similar disagreement over the code of conduct.