The Minnesota freshman has faced criticism for weeks over her positions on the Jewish state, but it boiled over late Sunday after she reacted to a Republican critic in a tweet.
"It's all about the Benjamins baby," Omar replied, referring to American $100 bills featuring the likeness of Benjamin Franklin.
When a user asked who Omar believes is paying US politicians to support Israel, the former Somali refugee tweeted a one-word response: "AIPAC!"
The exchanges triggered an uproar, with House Speaker Nancy Pelosi castigating Omar and demanding an apology for using "anti-Semitic tropes" in her tweet.
"Congresswoman Omar's use of anti-Semitic tropes and prejudicial accusations about Israel's supporters is deeply offensive," said Pelosi and other House Democratic leaders.
"We condemn these remarks and we call upon Congresswoman Omar to immediately apologize for these hurtful comments," they said in a statement.
Pelosi also tweeted that she spoke with Omar Monday, and that they "agreed that we must use this moment to move forward as we reject anti-Semitism in all forms."
Several Democrats and Republicans spoke out to say Omar's prejudicial accusations were wrong about why lawmakers support Israel, arguing that the support is based on shared values and strategic interests.
Democrat Eliot Engel, chairman of the House Foreign Affairs Committee of which Omar is a member, called it "shocking to hear a Member of Congress invoke the anti-Semitic trope of 'Jewish money.'"
Liz Cheney, a top Republican leader in the House of Representatives, urged Democratic leaders to remove Omar from the committee.
Two Democratic lawmakers circulated a letter addressed to Pelosi and other leaders urging them to take "swift action" against anti-Semitic language by members.
The letter's authors, representatives Josh Gottheimer and Elaine Luria, who are both Jewish, did not mention Omar by name, but their intent was clear.
"We must speak out when any Member -- Democrat or Republican –- uses harmful tropes and stereotypes, levels accusations of dual loyalty, or makes reckless statements like those yesterday," they wrote.
Omar has been critical of Israel's government over its treatment of Palestinians. She has supported the Boycott, Divestment, Sanctions (BDS) movement which aims to put economic and political pressure on Israel.
Omar and fellow Muslim congressional freshman Rashida Tlaib's support for the boycott has opened a breach in the Democratic Party and threatens to create a fissure in the ironclad US-Israeli alliance.
Last month, Omar expressed regret for saying in a 2012 tweet that Israel "has hypnotized the world" while carrying out "evil."
AIPAC, the American Israel Public Affairs Committee, has formidable financial clout, and it prides itself on its influence in US politics.
"Involvement in the political process is a tangible way of showing friends of Israel that you care about who serves in Congress," the group says on its website.