Child abuse allegations against Sir Cyril Smith were raised on the floor at a Liberal party conference, the MP who investigated the scandal has claimed.
Simon Danczuk also claimed the government of the time could have been brought down if Sir Cyril had been prosecuted as it would have led to the fall of a paedophile network in and around Westminster.
The Liberal Democrats have been under pressure to explain what was known of Sir Cyril's activities following the serialisation by the Daily Mail of an investigation by Mr Danczuk, Labour MP for Rochdale, which is Sir Cyril's former constituency.
Deputy Prime Minister Nick Clegg has repeatedly insisted the Liberal Democrats had no knowledge of the child abuse scandal involving Sir Cyril.
Mr Clegg said all the current members of the parliamentary party who were around at the time had been questioned after alleged details of Sir Cyril's years of abuse of young boys were disclosed in the Commons in 2012, but none knew anything.
He added that a search of the party's surviving records, carried out following a request from solicitors representing one of the victims, also drew a blank.
Speaking on BBC Radio 4's Today programme, Mr Danczuk said: "These rumours were very well known around Rochdale so Rochdale Liberal councillors must surely have heard those rumours.
"It would be impossible for you to live or move around Rochdale without hearing the rumours around Cyril Smith and that went on for decades - those rumours existed for decades."
He went on: "The most important point is whether these rumours existed at a national level. Well, surely Liberal councillors in Rochdale would talk to people at a national level.
"But there is already evidence there isn't there because Michael Meadowcroft, a Liberal MP, is on the record as saying that he had these rumours. David Steel himself is on the record of saying that he heard these rumours, that he actually challenged Cyril Smith about these rumours.
"I spoke to a Liberal student activist from the mid-70s who said these allegations actually got raised on the floor of conference for the Liberals. Lots of people are aware of it."
Mr Danczuk said he believed Sir Cyril joined an "informal network of paedophiles that existed in and around Westminster" in the time after becoming an MP in 1972.
Asked why he said that with certainty, Mr Danczuk replied that Sir Cyril had been identified as attending Elm Guest House in south London, adding: "(This is) where it is alleged other significant paedophiles attended."
Asked why the national authorities would want to protect Sir Cyril, Mr Danczuk said: " Had he been prosecuted then a house of cards would have fallen in terms of that paedophile network and it could have brought the government down."
Sir Cyril was elected a Liberal MP in 1972 and became a Liberal Democrat on the formation of the new party before leaving Parliament in 1992. He was knighted in 1988.
Mr Clegg said yesterday that much of the abuse related to the period before the Lib Dems were formed in 1989 from the merger of the Liberal Party and the Social Democratic Party. Sir Cyril died in 2008.