Sir Michael Fallon, who quit as Defence Secretary on Wednesday, "categorically denies" allegations that he made inappropriate sexual comments to Andrea Leadsom.
Commons Leader Mrs Leadsom accused Sir Michael of making "lewd" remarks and passed a dossier of claims to Number 10, The Sun reports.
Sir Michael admitted his behaviour had "fallen below the high standards required" in his role and quit.
Sources close to the Tory MP said he "fundamentally denied" claims he made a crude joke to the Commons leader while Mrs Leadsom's team and Number 10 declined to comment.
He is reported to have said to Mrs Leadsom, who complained of cold hands: “I know where you can put them to warm them up”.
A source close to Sir Michael told The Sun last night: “He doesn’t remember what he is supposed to have said in the committee. But he doesn’t deny making comments that someone might have taken offence at.
“He may have said something that Andrea was offended by, but he categorically denies saying something as appalling as he knows where she could warm her hands. That is an appalling slur from Leadsom.”
It came after Prime Minister Theresa May faced a backlash after appointing former chief whip Gavin Williamson, who has never held ministerial office, to replace Sir Michael.
Tory former defence minister Anna Soubry said: "It does rather look like he picked himself a plum job."
Mrs May has called a meeting of all party leaders on Monday to agree a new system of dealing with abuse complaints in Parliament.
Meanwhile, Labour MP Kelvin Hopkins, 76, was suspended from the party over allegations about his behaviour towards a young activist.
He has been an MP for 20 years and has remained on the backbenches except for a four month stint as culture spokesman last year.
It is understood that Mr Hopkins was spoken to about why his behaviour was inappropriate and reprimanded by then chief whip Dame Rosie Winterton when Ms Etemadzadeh made her initial complaint after dealings with the MP in 2014 and 2015.
A complaint made to the leader's office last year was based on the same information so no further action was taken.
Ms Etemadzadeh is understood to have given fresh information when she contacted the party about the allegations on Thursday.
On the left of the party, Mr Hopkins, has a long history of involvement in the trade union movement and was one of the 36 MPs to nominate Mr Corbyn when he stood for the Labour leadership in 2015.
The Luton North MP employs his wife Patricia as a part-time constituency secretary.
A woman at his home - who said she was his wife - said the MP was at a meeting in Luton on Thursday evening.
Asked about the suspension, she said: "I don't know anything about it."
Labour said it takes complaints "extremely seriously" and has "robust" systems in place to deal with them.
A spokesman said: "On the basis of allegations received by the Labour Party today, Kelvin Hopkins has been suspended from party membership, and therefore the Labour whip, while an investigation takes place.
"The Labour Party takes all such complaints extremely seriously and has robust procedures in place to deal with them."