More and more disgruntled Labour voters are switching support to the far-right British National Party, deputy leadership hopeful Jon Cruddas is set to warn.
Mr Cruddas, a former Downing Street aide, will suggest people in Labour heartlands have lost hope and turned to the BNP in protest at mainstream politics.
And the debate over the wearing of veils, the language of the "war on terror" and "tough" talk on immigration had made things worse and "played into the hands of extremism"
Mr Cruddas is the MP for Dagenham in east London, where the BNP won 11 council seats in May's local elections, making it the main opposition group.
Employment Minister Margaret Hodge, MP for neighbouring Barking, was accused of helping the far-right victory by publicly claiming eight in ten white families were "tempted" to vote BNP.
However, at a conference organised by anti-fascist organisation Searchlight Mr Cruddas will on Saturday say that the party is "beginning to establish itself as a rival to Labour in many of our traditional heartlands".
He has dubbed the acquittal of BNP leader Nick Griffin on race-hate charges a "wake-up call" for mainstream politicians and backed calls for fresh laws.
"We don't need a jury to tell us whether the BNP are a bunch of racist thugs - experience in my own area shows their real background of hate and division," he said after Friday's verdict.
"We need better laws in place, but we also need to rebuild local parties so that we can confront the BNP wherever they push their ugly politics.
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"The BNP thrive in areas where people feel forgotten by the mainstream parties. We have to mobilise ordinary decent people against the BNP, on the streets, in workplaces and in local communities."
