NSW Treasurer Matt Kean has renewed his call for the Liberal Party candidate in the federal seat of Warringah to be disendorsed, saying she is "not fit for office".
Mr Kean said he was "very concerned" Katherine Deves's continued candidacy threatened the re-election of moderate Liberal MPs at next month's federal election.
Prime Minister Scott Morrison has shot down criticism of his candidate, saying she would make a "great member of parliament" and he would not let her be "silenced".
Ms Deves has come under intense scrutiny after a series of social media posts in which she made controversial comments about transgender people came to light and were published in the media.
Among her comments in now-deleted Twitter posts, the lawyer from Sydney's northern beaches called transgender children "surgically mutilated and sterilised" and claimed "half of all males with trans identities are sex offenders".
Ms Deves apologised for the "language" she used but has kept the backing of Mr Morrison.
"In my dedication to fighting for the rights of women and girls, my language has on occasion been unacceptable. It has hurt people and detracted from my arguments," Ms Deves said in a statement.
On Tuesday morning, Mr Kean told RN Breakfast he believed Ms Deves should be disendorsed immediately and labelled some of her comments as "outright bigotry".
"I do not believe she's fit for office. I do not believe that she is aligned with the values of the Liberal Party," he said.
Mr Kean highlighted a number of Ms Deves's posts, including one comparing a legal case overseas involving a transgender child to the "grudge trials of the Third Reich".
"To compare this issue to one of the worst atrocities in human history is appalling, absolutely disgraceful," he said.
"We live in a cosmopolitan, multicultural society where people are free to be themselves and that's a fundamental tenet of liberalism.
"This is not a one-off drunken Twitter rant, this is not a a statement made at university 30 years ago.
"This is a series of persistent positions held over a long period and in recent times."
Mr Kean, a member of the Liberal's moderate faction, believes the controversy threatens the political fortunes of moderate federal government MPs Dave Sharma and Trent Zimmerman.
Both Mr Sharma and Mr Zimmerman face challenges by independent candidates in their inner-Sydney electorates of Wentworth and North Sydney.
"I don't think having candidates that want to spruik the politics of division is in the interests of the party or in the interests of those candidates," he said.
Ms Deves is a co-founder of Save Women's Sport, an organisation campaigning to ban trans women from competing against biological female athletes.
On Tuesday Mr Morrison defended Ms Deves, who was picked by a selection panel including the Prime Minister instead of going through a traditional preselection process.
He said she had learned from the comments, which she "regrets", stating he believed Ms Deves would make a "great member of parliament".
Mr Morrison said he would "stand up with" Ms Deves "who always stands up for women and women's sport".
"I'm not going to allow her to be silenced," Mr Morrison said.
"I'm not going to allow her to be pushed aside as the pile-on comes in to try and silence her."
Former prime ministers Tony Abbott, who previously sat in Warringah, and John Howard have also supported Ms Deves's candidacy.
