Lord Bassam has appealed to opponents to stop descending to personal abuse in the battle about whether there should be an elected mayor.
In an open letter to all Brighton and Hove councillors, the peer, who backs the Yes campaign, said a newspaper produced by the No lobby marked a new low point in the debate.
He said: "I have never been someone to shy away from the rough and tumble of politics but the hysterical tone of the articles, the lies and the personal abuse that fill the pages of this newspaper are shameful and the reputation of the council and all elected members suffers.
"I want to appeal to all the decent and fair-minded councillors in all parties to draw back before they give any further support to a campaign whose main message seems to have been hijacked by a small group for their own political ends."
He said the No case was hardly being put and added: "It is drowned out by personal slander from people who seem to hate me with a loathing, and the privatisation fantasies of the Trotskyite Left."
Lord Bassam said the paper had been printed by EastEnd Offset, the printing press owned by the Socialist Workers Party which he called a small fanatical group.
He added: "Much of the vindictive abuse from the No camp has been repeated in The Argus by the likes of Tony Greenstein - the only person to have been expelled from every known left wing faction in the country, and Richard Stanton, the man who, when a Brighton councillor, publicly supported the IRA's bombing of the Grand Hotel."
Lord Bassam said: "On a purely personal level, I ask whether either myself or my family deserve such a level of abuse. If I thought it right and could afford to do it I would sue for defamation.
"Whatever my personal faults over 20 years, I have worked hard in our once tolerant city politics to raise standards in public service and generally try do the best for the people of Brighton and Hove. And doing the best for local people is what this debate should be about."
Green group convenor Keith Taylor said Lord Bassam was guilty of mud-slinging himself when he concentrated on identifying No supporters as being on the far Left.
Mr Greenstein, who runs the Brighton and Hove Unemployed Workers' Centre, said he had been expelled only from the Socialist Workers' Party.
He added that in the past Lord Bassam had supported Richard Stanton and that the councillor got re-elected with an increased majority after making his controversial remarks.
Mr Greenstein, a member of the Socialist Alliance, said: "It is ironic that Lord Bassam, ex-squatter and himself a member of various far Left groups before he decided such associations didn't benefit his career, should now attack those who have stuck to their principles."
He rejected any suggestion that Lord Bassam and his family had been targeted but said what had been questioned were the peer's connections to firms benefiting from the privatisation of public services.
Mr Greenstein said the choice of printers had been made on cost grounds and the firm also printed non-political papers such as Private Eye.
Tory opposition leader Brian Oxley said Lord Bassam had used the cult of personality relentlessly in the elected mayor campaign.
He added: "Steve mentions descending into gutter politics but it was the Yes campaign which has made so much of the New York Mayor's role in boosting the city after the attacks of September 11 where thousands have lost their lives.
"Any councillor in the Yes campaign will know perfectly well that in this country, without executive mayors, local authorities have all the powers they need and the individuals necessary to react to a civil emergency.
"What is so annoying for the Labour establishment is that the Left has fractured over this. It is between the Blairites and the old Labour veterans plus the hard Left."
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