The newly elected upper house MP sparked controversy in March after attending an anti-transgender rally where neo-Nazis performed the "heil Hitler" salute.
She was originally suspended for nine months, but an expulsion motion was brought to the party room on Friday after she issued Mr Pesutto an ultimatum and later a defamation concerns notice.
Liberal MPs voted 19 to 11 to expel Ms Deeming from the parliamentary party for "bringing discredit" to the Victorian Liberals.
Mr Pesutto maintained Ms Deeming's expulsion was not about her controversial views, but suggested her legal threat did not sit well with MPs.
In a lengthy interview with the Herald Sun, Ms Deeming said she felt betrayed and had honoured the terms of her suspension even when Mr Pesutto did not.
She also maintained she would not quit the Liberal Party.
"If they want to get me out of the party, then it's going to be another public round of beating me up for doing nothing wrong," Ms Deeming said.
"And if they want to have another go, they are welcome to it, but I know how much support I've got amongst party members because thousands and thousands of them have contacted my office since March."
Victorian Liberal Party President Greg Mirabella wrote to rank-and-file members on Friday to hose down speculation administrators were considering expelling Ms Deeming from the wider party.
He said the committee was yet to meet after Friday's motion, and the basis for suspension or expulsion would ultimately be a matter for the state assembly to decide through a vote.
"In the meantime, my message to all of you is this: winning elections is a team sport," Mr Mirabella wrote in the letter.
"It is incumbent on all of us to unite behind the parliamentary team and its leader, and move forward."
Ms Deeming said her legal action against Mr Pesutto was a matter for her lawyers, saying she could not defend her reputation through internal party processes.
"I gave John weeks and weeks to do what he promised the party room back in March that he would do, that in return for me accepting a nine-month suspension, he would issue a joint statement clearing my name," she said.
"He didn't honour his commitment, so we are here because of him."
Mr Pesutto denies he agreed to issue a joint statement exonerating Ms Deeming of being a Nazi or Nazi sympathiser and plans to defend any legal challenge.
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