The leaflet was sent to homes across Blackburn
An investigation is under way after leaflets - purporting to be from the Conservative Party - blamed Labour for atrocities in Afghanistan and Iraq.
The Tories said they "do not condone" the election material, which was sent out to homes in Blackburn, and were investigating who sent it.
Labour called it an "outrageous slur" and called for David Cameron, the Conservative leader, to apologise.
The Lib Dems said if it did come from the Tories then it was "hypocritical".
A Conservative spokesman said: "We do not condone the comments in this leaflet which do not represent the Conservative Party or the candidate in Blackburn."
Labour's defence secretary, Bob Ainsworth, called for David Cameron, the Conservative leader, to apologise.
He said: "The implication of this leaflet is clear; that British troops are responsible for atrocities while serving their country overseas.
"It is an outrageous slur. While Mr Cameron claims he supports our troops, his candidate is busy undermining them. Mr Cameron must apologise."
The leaflet, which was folded up with other Tory literature, was posted to thousands of homes last week.
Part of it read: "We have in front of us a whole saga of atrocities committed in Iraq, in Afghanistan, in Palestine, and if this was not enough, the Labour government allowed the Israeli government to create havoc in Lebanon and Gaza in Palestine..killing and maiming thousands of innocent civilians.
"But we now know Labour's true colours! We cannot be deceived by their hollow claims."
It was written in both English and Gujarati languages, and in some places it appeals directly to local Muslim communities.
Liberal Democrat, David Foster, said: "I have seen the leaflet and I am not even sure whether it was even passed by the Conservatives, it could have been a rogue member of the party.
"However, it is highly hypocritical if they have. We had a motion in January at the council in which we called for Jack Straw to stop Israel from attacking Palestine and not one Tory voted for it."
Candidates for Blackburn so far: Bobby Anwar: UK Independence Party; Grace Astley: Independent; Paul English: Liberal Democrat; Robin Evans: British National Party; Bushra Irfanullah: Bushra Irfan of Blackburn; Michael Law-Riding; Conservative: Janis Sharp: Independent; Jack Straw: Labour