Mr Phillips said Labour was in danger of collapsing into a “brutish, authoritarian cult”. Labour frontbencher Khalid Mahmood also launched a bitter attack on party bosses over the “astonishing” decision to suspend Mr Phillips.
The Shadow Europe minister said the move to discipline the former ex-chairman of the Equality and Human Rights Commission had brought “disrepute” on the party.
Ex-Cabinet minister Lord Falconer and senior backbencher Ben Bradshaw also hit out.
Mr Phillips – who ruled out voting for Jeremy Corbyn’s outfit at the last election over its failure to deal with anti-Semitism – is being investigated over past comments, including remarks on Pakistani Muslim men sexually abusing children in northern British towns.
It is understood that Labour’s general secretary, Jennie Formby, had suspended him as a matter of urgency to “protect the party’s reputation”.
Mr Phillips told Radio 4’s Today programme: “I’m surprised about what is and always has been an open and democratic party deciding that its members cannot have healthy debate about how we address differences of values and outlooks.
“Let us be clear about this. They say I’m accusing Muslims of being different.
“Well, actually, that’s true. Muslims are different and, in many ways, I think that’s admirable.”
The 66-year-old said it was “nonsense” to define being anti-Islam as racist, arguing that Muslims do not identify as a race.
He has in the past rallied against the All-Party Parliamentary Group on British Muslims’ move to define Islamophobia – a definition adopted by the Labour Party.
The anti-racism campaigner told the BBC: “My objection is very simple. That definition said, to words of the effect, that Islamophobia is rooted in a kind of racism – expressions of hostility towards Muslimness.
“First of all, Muslims are not a race. My personal hero was Muhammad Ali, before that Malcolm X.
“They became Muslims largely because it is a pan-racial faith. This is not a racial grouping, so describing hostility to them as racial is nonsense.”
The move has also drawn anger from several Labour figures, with Mr Mahmood saying: “It was with no small measure of astonishment that I learnt that my own party, the Labour Party, had initiated proceedings against Trevor Phillips on grounds of ‘racism’ and ‘Islamophobia’.”
Writing for the Policy Exchange think tank, he said: “The charges are so outlandish as to bring disrepute on all involved in making them; and I fear they further add to the sense that we, as a party, have badly lost our way.”