Moira Deeming on Monday was subject to an expulsion move, triggered by Opposition Leader John Pesutto, after she spoke at an anti-trans rights event outside Victorian parliament on March 18.
But she was instead suspended for nine months following the two-hour meeting.
The upper house MP walked into the meeting at state parliament flanked by colleagues Renee Heath, Ryan Smith, Bev McArthur, Richard Riordan and Joe McCracken.
"Regardless of what happens here today, I have one message: I do not believe for one second that Moira is a Nazi or a Nazi sympathiser, or has any association with Nazis," fellow Legislative Council MP Nick McGowan told journalists ahead of the meeting.
"The only person responsible for the Nazi salute on the steps of parliament is the premier who took away police's power. Our narrative needs to return to and focus on a government that is corrupt."
The Melbourne rally was organised by British anti-trans activist Kellie-Jay Keen-Minshull and attended by neo-Nazis who repeatedly performed the Nazi salute.
It sparked community outrage and a commitment from the Victorian government to fast-track a ban on the gesture.
Mr Pesutto accused Ms Deeming of bringing discredit to the party over her association with rally figures with alleged links to extremists and failing to leave the event when neo-Nazis showed up.
The upper house MP has categorically denied she or organisers of the rally did anything wrong and labelled condemnation from party leadership unjust.
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