The Shadow Home Secretary described the Ukip leader's comments as out to “demonise and marginalise” Muslims which would “not solve anything”.
The Ukip leader claimed that the UK community needed to “do more” to help get rid of the “cancer” of extremism in Britain.
Mr Nuttall also suggested that the attacker, who killed three people on Wednesday afternoon, would not have worked alone with his planning.
The Labour MP criticised Mr Nuttall’s comments as she called for everyone to come together.
Diane Abbott fumed at Paul Nuttall for his comments following the London terror attack
Speaking on BBC News, she said: “That sort of talk about cancers is deeply problematic.
“We have to come together, we all have to support each other. One of the reasons why Londoners are quite resilient is we have dealt with waves of terrorism before.
“What that has taught us is there is no use in demonising violence and in the end the right social contacts to isolate the men of violence.
“People within the Muslim community know that there is always more to do.
“But like I say to demonise and to marginalise the Muslim community will not solve anything.”
To demonise and to marginalise the Muslim community will not solve anything
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Four people were killed during the incident on Wednesday, including the attacker, and around 40 people were left injured.
Mr Nuttall argued that other people in the community would have known about the planning of the Westminster attack, before he claimed there was a “cancer” in the Muslim community.
He said: “This guy’s going to be described as a lone wolf. I suspect that he won’t be a lone wolf because lone wolves are never lone wolves.
“There’ll be other people within the community who knew what this guy was up to, these people need to be caught and they need to be brought to justice.
“We’ve got to keep our parliamentarians safe and we’ve got to keep the people who visit the Palace of Westminster safe, that is the most important thing here.
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“We have a cancer within a particular community and it needs to be cut out. The Muslim community I believe needs do more about this.”
The Labour MP rejected these claims and reiterated that Londoner’s returned to their normal routine, insisting it was not a successful terror attack.
She said: “We can say it wasn’t successful, first of all MPs came in today in greater numbers than normally would have come in because we were determined to show that Parliament was going on as usual.
“I came in this morning on the underground and that was as full as usual, Londoners are very resilient they don’t scare.
“Londoners have got back to their normal routine because getting back to our normal routine is Londoner’s way of saying terrorists won’t win.”
Earlier in the day Prime Minister Theresa May said the Westminster terror attack was a “perversion” of Islam and Muslims must not be blamed for it.
The Prime Minister told MPs “it is wrong to describe what happened as Islamic terrorism; it is Islamist terrorism – a perversion of a great faith”.
The Muslim Council of Britain has also condemned the attack, with secretary general Harun Khan calling it “cowardly and depraved”.
He said: “There is no justification for this act whatsoever.
“The best response to this outrage is to make sure we come together in solidarity and not allow the terrorists to divide us.
“My condolences, thoughts and prayers go to the families of the victims.”