Angela Eagle said Labour is "not split down the middle like the Conservative party" which is "in meltdown" over the EU, adding that the Labour party is united.
"The backlash from the eurosceptics which has shredded the party down the middle is a result of that kind of cynical manipulation," she said.
The Labour MP also said that Labour voters were not divided on the issue.
It has previously been suggested that many Labour supporters, particularly in the north of England, have been adversely affected by high levels of immigration and have turned to the UK Independence Party as a response.
But Eagle said that many workers' rights, as well as having a more productive economy, stem from the EU and that Labour will be making that case in the build up to the referendum.
She added that it's important to remember there are positive arguments surrounding immigration, of which having a more productive economy is one.
The shadow business secretary also defended her leader Jeremy Corbyn against claims that he harbours eurosceptic views.
"[Corbyn] recognises that it is Labour votes that will keep us in Europe, and it's really important for our future as a country that we don't turn our back on the largest single market in the world," she said.