His accusation follows a series of controversial comments by Plaid party members over the future of the Welsh language and the issue of in-migration.
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The Welsh nationalist are now being more honest about their racism and to them the enemy is the English
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Blaenau Gwent MP, Llew Smith
The latest attack by the Blaenau Gwent MP Llew Smith follows the resignation of a member of Plaid's National Executive after he said Wales was becoming 'a dumping ground for oddballs and misfits'.
Gwilym ab Ioan has kept his position as Plaid's vice-chair in Ceredigion and Brecknockshire but will face a motion of no confidence at the next meeting of the regional branches.
The comments, which were posted on an internet news group, have refuelled the debate on Plaid's ethos.
Mr Smith said: "I am increasingly arriving at the conclusion that it is fundamentally a racist organisation.
"They have to do something dramatic to show that they have moved away from their history."
Furore
The row over the deterioration of the Welsh Language and in-migration was ignited six months ago by fellow Plaid Cymru member Seimon Glyn.
He sparked a furore in February when he said English people settling in north Wales were a "drain on resources" who were replacing Welsh culture with their own.
At the National Eisteddfod in Denbigh, north Wales, on Wednesday Mr Glyn published a book of letters of support for his remarks.
He has insisted that he is unrepentant of his comments and has denied that his intervention was aimed at pitting Welsh-speaker against non-Welsh speaker.
Mr Glyn said: "What I am saying is that if we don't do something about this issue now it will be the end for Welsh communities."
But Mr Smith has described the comments as 'totally objectionable'.
"The Welsh nationalists are now being more honest about their racism and to them the enemy is the English," he said.
Meanwhile Mr ab Ioan's comments have also prompted criticism from his own party.
The party's chief executive Karl Davies said: "If he continues to use such language then his membership of the party will certainly be brought into question by many people."
"Any individual that continues to make gratuitous comments which are offensive to large sections of our community has no place in Plaid Cymru."