The former Liberal leader Lord Steel has told ITV News that the party should lift the threat of expulsion hanging over Lord Rennard and the peer should withdraw any legal action.
He says the party leadership need to "get to grips" with the situation and that currently the party is in an "awful mess".
Lord Steel's comments come in the wake of the announcement that Rennard was being suspended from the party pending the investigation into claims that he brought the Lib Dems into disrepute by his refusal to apologise to four women activists who allege he sexually harassed them.
He was ordered to issue the apology by Lib Dem leader Nick Clegg after an earlier inquiry by Alistair Webster QC concluded that the women's claims were credible but there was insufficient evidence to bring disciplinary charges.
Supporters of the peer dismissed the latest inquiry as no more than a "re-run" of the first.
Earlier today it emerged that Lord Rennard had instructed senior counsel to advise him.A spokesman for the peer said he had instructed a QC specialising in public law to advise him on the "lawfulness or otherwise" of the decision to launch a second inquiry into his conduct.
Sources close to Lord Rennard said he had moved "heaven and earth" to try to get the matter resolved.
Lord Ashdown has urged Lord Rennard to reflect on his approach to the complaints about him from women in the party.
In an interview with ITV News, he said: "I think there's a real change in climate, the way that people behaved in the past is no longer tolerable.
"Women now have taken power and are determined to ensure that whatever may have happened - without presuming guilt or innocence on anybody's part... these are new standards - and I am delighted and proud that, with great courage, Nick Clegg has stood up for those standards."
"That says a lot about the Liberal Democrats, it says a lot about him, it says a lot about the climate we need to be creating in politics."
The Liberal Democrat Women group pressed for the use of an outside mediator to try to resolve the dispute when its represenatives met Mr Clegg.
Its chair, Ros Gordon, said it had been a "very productive meeting".
"We discussed LDW's work behind the scenes to try and resolve the current situation," she said.
"LDW suggested the use of a professional impartial mediator. LDW consider this could be a useful tool to resolve the matter. LDW will also be raising this with the Party President Tim Farron."