Former Liberal MP Moira Deeming has launched defamation action against Victorian Opposition Leader John Pesutto.

Deeming’s lawyers on Tuesday filed a statement of claim against her former boss in the Federal Court.

The first-term MP was expelled from the parliamentary Liberal Party after taking part in a rally in March that was also attended by a group of masked men who performed Nazi salutes.

Deeming issued several defamation concerns notices to Pesutto, alleging he publicly accused her of being a Nazi sympathiser and used the claim to bully and threaten her with expulsion.

Pesutto denies he accused the now-independent MP of being a Nazi or having Nazi sympathies.

Attempted mediation failed after Deeming sought an exoneration from Pesutto, financial restoration and her return to the party room.

Deeming and Pesutto have committed not to use party funds to prop up their legal cases, with Pesutto saying he will pay his legal costs if he must.

-AAP