Boris Johnson himself threatened to pull funding from backbenchers' constituencies unless they voted 'the right way', MPs have reportedly claimed.
Chris Bryant, the chairman of the Commons Standards Committee says he has been told the Prime Minister was involved in bully-boy tactics used by party whips to stop rebellious MPs ousting him.
He told the BBC he believes such behaviour is illegal.
Labour MP Mr Bryant said he has spoken to "about a dozen" Conservative MPs in recent days who have been threatened by Tory whips either with having funding withdrawn from their constituencies or promised funding if they vote "the right way".
"I have even heard MPs alleging that the Prime Minister himself has been doing this," Mr Bryant said.
"What I have said to all of those people is that that is misconduct in public office. The people who should be dealing with such allegations are the police."
Mr Bryant added: "It is illegal. We are meant to operate as MPs without fear or favour. The allocation of taxpayer funding to constituencies should be according to need, not according to the need to keep the Prime Minister in his job.
"The levelling up funds that have been introduced in the last two years are an open opportunity for Government ministers to corruptly hand out money to some MPs and not to others."
It comes as the senior Tory backbencher who accused No 10 of trying to "blackmail" MPs seeking to oust Boris Johnson is to meet police to discuss his allegations.
William Wragg said he will be meeting a Scotland Yard detective in the House of Commons early next week, raising the prospect police could open an investigation.
A No 10 spokesman said it would only open an inquiry if it was presented with evidence to back up Mr Wragg's assertions.
Last night, the Prime Minister was warned the alleged threats to cut off constituency cash from Tory rebels may be unlawful.
The Good Law Project has sent a pre-action letter to the Prime Minister over claims Tory enforcers have been warned MPs they could lose funding if they don't toe the line.
Lawyers said the allegations "may amount to misconduct in public office" in a letter to the PM, Levelling Up Secretary Michael Gove, Cabinet Office Minister Steve Barclay and Chief Whip Mark Spencer.
The letter also demands details of any complaints made by MPs about these threats, and for the Government to confirm they are investigating the allegations.
