Victorian Liberal Moira Deeming has accused former party leader Matthew Guy of assaulting her during a function in May.
CCTV footage of the incident, shared with AAP, appears to show Mr Guy putting his hand on Mrs Deeming's upper back as they lean in to talk to one another.
Victorian Liberal Leader Jess Wilson confirmed the matter was being investigated.
"Like every other Victorian, the parties involved deserve due process, the presumption of innocence and their privacy respected while this is investigated," she said in a statement on Thursday.
"This matter is now with Victoria Police and it would be inappropriate for me to comment further."
Mr Guy and Mrs Deeming have both been contacted for comment.
However, The Age has reported that Mr Guy "vehemently denied to colleagues that anything untoward took place".
Ms Wilson said her focus remains on issues important to voters and earning their trust ahead of the November state election.
In the CCTV footage, Mr Guy is seen seated at a table and talking with Mrs Deeming and another man.
The former leader appears to place his hand on Mrs Deeming's upper back or shoulder area and pulling her in to say something before doing a similar gesture with the man.
Victoria Police confirmed they are investigating an alleged assault at an event in Sunshine West on May 23.
"It was reported a woman was assaulted by a man at an event held at a function venue on Sommerville Road," police said.
They said Mrs Deeming left following the incident and did not require medical attention.
She reported it to authorities on June 16.
State Attorney-General Sonya Kilkenny has posed questions to Ms Wilson about what and when she knew about the allegation, what actions she has taken, and whether it is appropriate for MPs to remain in the partyroom when they are the subject of a police complaint.
"An alleged assault by one Liberal member of parliament against another Liberal colleague - they're serious questions that the Liberal Leader Jess Wilson needs to come and answer," Premier Jacinta Allan told reporters on Thursday.
The allegation comes five months out from the state election, where the party is attempting to turf out a three-term Labor government but also faces a surging One Nation.
It has been rocked by a series of scandals, including former deputy leader Sam Groth leaving his Mornington Peninsula seat of Nepean.
The first-term MP said the public pressure placed on his family had been significant, claiming that some of that came from "within my own party".
Meanwhile, a battle in the courts is continuing after Mrs Deeming successfully sued former leader John Pesutto for defamation after he implied she was associated with neo-Nazis.
Mr Pesutto was ordered to pay $2.3 million in legal costs to Mrs Deeming and faced bankruptcy, which would have forced him from parliament.
The state Liberals' administrative committee agreed to loan Mr Pesutto $1.55 million.
Former committee member Colleen Harkin and four others sought to block the payment over an alleged breach of party rules, launching a Supreme Court challenge.
Ms Harkin has since defected to One Nation.
Mrs Deeming was also ousted in preselection in her Western Metropolitan upper house seat before being sensationally re-endorsed unopposed.
Successful challenger Dinesh Gourisetty was forced to step aside after previously providing a character reference for a now-convicted child sex offender.
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