David McLachlan, from South Lanarkshire Council, was suspended after he was identified as the councillor who told Mr Sarwar “Scotland wouldn’t vote for a brown Muslim Paki”.
At the time he said he “categorically denied the deeply hurtful allegations”. Yesterday he was cleared by a three-member panel of Labour’s National Constitutional Committee.
He said: “This has been a tremendously difficult time for my family and me and I’m delighted the NCC hearing panel has come to this conclusion. I don’t know if my family and I will ever get over the stress this has brought to all of us.”
Mr Sarwar’s accusation was made after the leadership campaign when he launched his Cross-Party Group on Tackling Islamophobia in Holyrood.
He did not name the councillor, but party bosses later asked him to provide them with his identity.
Mr Sarwar said: “I have consistently said that this isn’t about one individual.
“This is about challenging a wider culture and we have made great strides. I’m disappointed with the process and outcome and will have more to say about it.”