She was suspended for nine months in late March after attending an anti-transgender rights rally in Melbourne where neo-Nazis performed the "sieg heil" salute.
In an email, Ms Deeming demanded Victorian Opposition Leader John Pesutto agree to issue a media statement exonerating her of being a Nazi or Nazi sympathiser by 2pm on Thursday or face legal action.
The upper house MP later confirmed she would make good on her threat in a follow-up email to colleagues but she backed away from that position on Saturday.
In a statement, Ms Deeming said she never considered suing the Liberal Party, rather she contemplated legal mediation as a way to settle on the conditions of her suspension.
She maintained that once she was told on Thursday night the party leadership refused her mediation request, she immediately informed party president Greg Mirabella she would not pursue it further.
Ms Deeming said published minutes from the March meeting showed the Liberal Party agreed no one was accusing her of being a Nazi or a Nazi sympathiser.
"All I have ever wanted, since the leader's failed attempt to have me expelled for allegedly bringing the party into disrepute, was to have my name cleared," she said in a statement on Twitter.
"These minutes afford me the full, official, written, public exoneration that the leadership seems unwilling to provide."
Ms Deeming said she was a proud Liberal and she looked forward to re-joining the parliamentary party at the end of her nine-month suspension.
Mr Pesutto on Friday said the party was considering expelling Ms Deeming over her planned legal action.
Federal Opposition Leader Peter Dutton also flagged intervening in the Victorian division as a way to sort out "the whole mess".
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