Mohammed Shafiq, the chief executive of anti-extremism charity the Ramadan Foundation, said Butt, 27, accused him of being a “government stooge” and labelled him a traitor.
Mr Shafiq said the incident took place College Green, outside the Houses of Parliament on May 23 2013 – one day after fusilier Lee Rigby was murdered in Woolwich.
The charity boss said Butt was with hate preacher Anjem Choudary at the time.
Khuram Butt called me a 'Murtad' which means traitor in Arabic and accused me of being a government stooge when I confronted Anjem Choudhury about him supporting terrorism
He said: “I was verbally assaulted by Khuram Butt one of the London Bridge killers the day after the brutal murder of Lee Rigby in May 2013. This took place on College Green, Westminster.
“Khuram Butt called me a 'Murtad' which means traitor in Arabic and accused me of being a government stooge when I confronted Anjem Choudhury about him supporting terrorism and my public campaign against Lee Rigby's murder.”
Mr Shafiq said police officers escorted Anjum, Butt and two other men aaway from the scene but no further action was taken.
London terror raids Sun, June 4, 2017
Police have raided a block of flats in Barking in connection with last night's London Bridge terror attack.
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As police continue their investigations following the June 3 terror attacks, a block of flats in Barking is raided for possible suspects
The charity boss has called for an investigation after it emerged Butt was known to MI5.
He said: “It is clear that Anjem Choudary and his band of terrorist sympathisers were known to the police for many years.
“Many of us in the British Muslim community have been demanding action against these extremists to no avail. I am not surprised that Khuram Butt carried out the terrorist attack and there are serious questions for the authorities.
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“As in the Manchester terrorist attack, members of the Muslim community are reporting their suspicions about potential extremists which reinforces the strong links between the Muslim community and the police.
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London Bridge attacker Khuram Butt branded Muslim leader Mohammed Shafiq a traitor
“What is clear that Anjem Choudary, Khuram Butt and their group of terrorist sympathisers have been known to authorities and nothing was done for years.
“I call for an immediate investigation into what the police knew, what was done and why action was not taken against them.”
Pakistani-born British citizen Butt and Rachid Redouane, who claimed to be Moroccan-Libyan, were two of the three men who carried out the deadly assault in which seven people died and dozens more were injured on Saturday night.
A third was named by Scotland Yard today as 22-year-old Moroccan-Italian Youssef Zaghba who lived in east London.
London terrorists – Rachid Redouane and Youssef Zaghba were shot dead by police
Britain's top counter-terrorism officer said Butt, 27, was investigated by officers in 2015 but they found no evidence of attack planning and he was "prioritised in the lower echelons of our investigative work”.
12 people who were arrested in east London in the wake of the London terror attack have been released without charge.
Assistant Commissioner Mark Rowley said Butt was known to police and MI5, but because the probe into him did not reveal evidence of attack planning or other serious offending he was prioritised accordingly.
Mohammed Shafiq said Butt verbally assaulted him the day after Lee Rigby died
The disclosure means that perpetrators in all three of the terrorist outrages to hit Britain this year had at some point appeared on the radar of authorities.
The father-of-two, who reportedly appeared on Channel 4 documentary The Jihadis Next Door, was also reported to the anti-terror hotline in 2015 for showing signs of "extremism or radicalisation”.
London Mayor Sadiq Khan said questions would need to be asked about what the police knew of Butt but he told BBC1's Breakfast: "The responsibility for the attacks on Saturday night lies with the terrorists."