Labour has readmitted former leader Jeremy Corbyn as a member following his suspension last month.
He was punished after saying the scale of anti-Semitism in the party had been "overstated", in response to a damning report by the Equalities and Human Rights Commission.
Mr Corbyn issued a statement earlier saying he regretted any "pain" caused.
But current leader Sir Keir Starmer maintained Mr Corbyn's initial reaction to the report had been "wrong".
BBC political editor Laura Kuenssberg said a decision had not yet been taken on whether to restore the Labour whip to Mr Corbyn, which would allow him to sit once more as one of its MPs.
A panel made up of members of the party's National Executive Committee met on Tuesday to decide whether to take further disciplinary action against him or to lift the suspension.
After it decided to readmit Mr Corbyn, Sir Keir tweeted that it had been a "painful day for the Jewish community and those Labour members who have fought so hard to tackle anti-Semitism".
He added: "Jeremy Corbyn's statement in response to the EHRC report was wrong and completely distracted from a report that identified unlawful conduct in our tackling of racism within the Labour Party. This should shame us all."
When Labour acted swiftly and decisively to suspend Jeremy Corbyn, it was seen as a signal the party wanted to distance itself from a toxic period in its recent past.
Sir Keir Starmer said he hadn't instigated the action but he supported it.
But whatever decision was reached on Tuesday, criticism would have followed.
Mr Corbyn didn't apologise for suggesting the scale of anti-Semitism had been overstated by political opponents, which was the reason for his suspension. He simply clarified what he had meant.
So reinstating him was bound to attract criticism from those cheered by his suspension.
Not to have reinstated him, however, would most likely have fuelled a factional war between those supportive of the Starmer leadership and those - including some union leaders - who remain close to Mr Corbyn.
Sir Keir reiterated his commitment to an independent complaints process in the New Year - an Equality and Human Rights Commission recommendation.
But putting Labour under fresh leadership hasn't silenced or banished those still supportive of the old leadership.
And the line Sir Keir wants to draw under the anti-Semitism rows hasn't been fully drawn.
In a statement earlier on Tuesday, Mr Corbyn - who is currently an independent MP - said it was "not his intention" to say anti-Jewish racism should be tolerated, and that he regretted the "pain" caused.
His statement added: "To be clear, concerns about anti-Semitism are neither 'exaggerated' nor 'overstated'.
"The point I wished to make was that the vast majority of Labour Party members were and remain committed anti-racists deeply opposed to anti-Semitism."
It is not yet clear whether Mr Corbyn will face further sanctions from the party.
'Failure to retract'
Its general secretary, David Evans, took the decision to suspend him in October, although Sir Keir endorsed it.
The ECHR's report found Labour had breached the Equalities Act over its handling of complaints of anti-Semitism during Mr Corbyn's time in charge.
Labour said Mr Corbyn had been suspended "for a failure to retract" his words.
Following his readmission, the Islington North MP said: "I hope this matter is resolved as quickly as possible, so that the party can work together to root out anti-Semitism and unite to oppose and defeat this deeply damaging Conservative government."
'Zero tolerance'
But the Jewish Labour Movement called the decision to readmit Mr Corbyn "extraordinary", adding: "After his failure of leadership to tackle anti-Semitism, so clearly set out in the EHRC's report, any reasonable and fair-minded observer would see Jeremy Corbyn's statement today as insincere and wholly inadequate."
Karen Pollock, chief executive of the Holocaust Educational Trust, said: "What message does this send? Zero tolerance either means zero tolerance or it's meaningless."
The co-chairman of the Conservative Party, MP Amanda Milling, has written to Sir Keir, saying: "You have claimed that Labour is 'under new leadership', but now is the moment to prove it - Mr Corbyn should be expelled permanently."
However, Len McCluskey, general secretary of the Unite union and a close ally of Mr Corbyn, called the reinstatement a "correct, fair and unifying decision".
He said Labour had to "move forward" in implementing the EHRC's recommendations and "redouble our efforts to inspire voters" about Sir Keir's policies, acting as a "unified and strong" party.