Phillips, the MP for Birmingham Yardley, has been outspoken in her criticism of Jeremy Corbyn for failing to tackle the ongoing problem within the party.
Speaking to LBC’s James O’Brien, Phillips said that following Labour MP Luciana Berger’s resignation over "a culture of bullying, bigotry and intimidation", she considered following in her footsteps.
She said: “The Luciana thing shook me very, very deeply.
“It was the episode of Panorama where I wobbled the most and felt not only was our movement intolerant of the Jewish community but also those brave staff – Jewish or otherwise – had been bullied and harassed and I just thought this is unrecognisable to me as the party.”
“The Labour Party didn’t do enough on Anti Semitism. I said this before and I say it again, there is no place for any type of racism in our party.” pic.twitter.com/D9n2yvg2N5— Jess Phillips MP (@jessphillips) January 13, 2020
She said that the Labour Party has “lost its credibility in how to handle complaints of racism, harassment, bullying” and have “lost the moral high ground”.
When asked by O’Brien why she didn't walk, she said that if she hadn't stayed, she would have been “replaced by somebody who might not have spoken up”.
"You have to focus on the outcome. You have to focus on what you want to see change. I could change nothing from the outside,” she said.
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Her interview comes as five candidates made it through to the next round of the Labour leadership battle after Clive Lewis dropped out.
On the phone-in, she was also asked about suspending her office manager Salma Hamid over “anti-semitic” tweets.
The Mail on Sunday uncovered messages posted by her key constituency office aide in which she branded Israel a "murderer" that was "inflicting Holocaust conditions on Palestinians".
In another tweet, the staff member appeared to liken Israel to the Islamic State terror group.
The messages were posted between 2014 and 2016 before she worked for Ms Phillips.
She said: “The comparison between the Israel to the Holocaust breaches the IHRA convention.”
Mrs Phillips said if she failed in her bid to replace Jeremy Corbyn, she would like to serve under her rival Lisa Nandy, the MP for Wigan.
She spoke at the time of her sadness at having to make the decision but said that she wanted to uphold a no-tolerance policy for anti-semitism.
On Monday, Emily Thornberry was named as the fifth candidate on the ballot to succeed Jeremy Corbyn as Labour leader, after winning the support of enough MPs and MEPs.
Sir Keir Starmer, Rebecca Long Bailey, Lisa Nandy and Jess Phillips had already qualified for the next stage.
Sir Keir, the shadow Brexit secretary, led the way with 89 nominations, ahead of Mrs Long Bailey on 33, Ms Nandy on 31 and the other two contenders on 23 each.