Home Secretary James Cleverly has denied an allegation that he described Stockton North using an offensive term.
Labour MP Alex Cunningham alleged the swear word was used during Prime Minister's Questions on Wednesday.
Mr Cunningham said it happened after he challenged the Prime Minister about child poverty in the constituency.
Mr Cleverly's spokesman said: "He did not say that, and would not. He's disappointed people would accuse him of doing so."
Speaking at Prime Minister's Questions, Mr Cunningham had asked: "Why are 34% of children in my constituency living in poverty?"
Making a point of order in the Commons later on Wednesday, Mr Cunningham said: "Before the prime minister answered, the home secretary chose to add in his pennyworth.
"He was seen and heard to say 'because it's a shithole'.
"Yes, I have contacted his office advising him I planned to name him, but sadly he has chosen not to be in the chamber.
"I know he is denying being the culprit, but the audio is clear and has been checked, and checked, and checked again.
"There is no doubt that these comments shame the home secretary, this rotten government, and the Tory Party. He is clearly unfit for his high office."
In footage of the exchange in the Commons, it was unclear where the remarks came from as there was no shot of Mr Cleverly mouthing the words.
The Conservative Party chairman and Durham North West MP Richard Holden said he was "sure it wasn't said by any Conservative MP".
He said Mr Cleverly had been to his constituency and had "real respect for the North of England".
Asked if the person who used the word should apologise, Mr Holden said: "As far as I'm concerned nobody did say it. I certainly didn't hear anything like that.
"He [Mr Cleverly] is a veteran of our armed forces as well so I think to throw around allegations like this is pretty cheap actually."
'Noisy atmosphere'
Speaking in the Commons, Mr Cunningham asked how he could secure an apology from the home secretary for the "appalling insult and foul language" about his seat in the north-east of England.
Commons Deputy Speaker Dame Eleanor Laing said it was her understanding that Commons Speaker Sir Lindsay Hoyle "didn't hear any remark of the kind from the chair at the time when the honourable gentleman was asking his question".
She said: "I understand that the alleged words were not actually used, though I appreciate what [Mr Cunningham] says.
"But I think we all know that it's very difficult in the noisy atmosphere of Prime Minister's Questions to discern exactly what someone says.
"So I can make no judgment here from the chair as to what was or wasn't said."
Responding at the despatch box to Mr Cunningham's initial question about poverty, Rishi Sunak said: "It's this government that has ensured that across our country 1.7 million fewer people are living in... poverty as a result of the actions of this government."
Mr Cunningham could then be heard calling out "it's not true" to the prime minister.
Mr Sunak went on: "Yes that is true. Not only that, hundreds of thousands fewer children are living in poverty, and income inequality is at a lower level than we inherited from the party opposite."
Chris McDonald, Labour's new candidate for Stockton North, addressed the alleged derogatory comment in a statement saying: "This is a disgrace, but it lays bare what the Tories' view of Teesside is."
The Local Democracy Reporting Service said Mr McDonald had called on Conservative councillor for Stockton North, Niall Innes, to "condemn the remarks made".
Mr Cunningham has chosen not to stand at the next general election, so Mr McDonald will represent Labour in the constituency.
