The 80-year-old confronted the TV reporter during an extraordinary press conference, thrusting a fist in his face when questioned about his family's Lebanese history.
The man known as parliament's Father of the House had been throwing his support behind Sunday's controversial anti-migration "March for Australia" rallies when he suddenly became irate in Brisbane on Thursday.
His grandfather Carl Robert Katter immigrated from Lebanon to Australia in 1898.
But Mr Katter lost his cool when asked about his Lebanese heritage by Nine Network journalist Josh Bavas.
"Don't say that, because that irritates me, and I punch blokes in the mouth for saying that," he yelled, cutting off the reporter's question.
"I am Australian. My family have been here since the dawn of time."
He then approached Bavas with a raised fist when the reporter tried to ask a follow up question.
"You're a racist," the veteran MP said, holding his fist close to the reporter's face.
"You cannot say what you just said without being identified as a racist.
"Gentlemen, ladies, this man is a racist. Don't listen to him."
Bavas stood his ground, taking Mr Katter to task about the confrontation.
"I don't think it's fair to threaten journalists with a fist before they've even finished the question - I think it's quite offensive to threaten a journalist," he replied.
Bavas later said he was trying to ask about the value migrant Australian families "including the Katters and my own" bring to the nation before he was cut off.
"In my near 20 years in journalism I've never experienced that kind of reaction from an elected representative," he said in a joint statement.
Nine Network stood by Bavas, demanding Mr Katter apologise for his "unacceptable" behaviour.
"His baseless and offensive accusation of racism is an irresponsible attempt to shut down a legitimate line of questioning," Nine Network's Fiona Dear said in the statement.
Mr Katter - federal parliament's longest-serving MP after first winning his seat in 1993 - also wanted an apology.
"I am a proud Australian. It shouldn't matter when you got here, how you got here, or how long you've been here ... If you live by our laws, our values, and fight for our way of life, you are an AUSTRALIAN," he later posted on Facebook.
"To be seen as anything other than Australian is highly insulting to me and I demand an apology."
The MP for the Queensland seat of Kennedy had earlier claimed at the press conference he would be "front and centre" at the anti-migration rally in Brisbane on Sunday.
"I don't care whether you're born here or not, if you have anti-Australian sentiments then get the hell out of my country," he said, flanked by Katter's Australian Party colleagues, including his son.
State MP Robbie Katter hoped Sunday's attendees would focus on national values after claiming recent pro-Palestinian rallies featured "anti-Australian sentiment".
March for Australia rally organisers have been linked with white nationalist ideas, sparking safety concerns for multi-cultural communities amid fears they may be targeted.
The Albanese Government condemned the nation-wide rallies, saying they were far right activism grounded in racism and had no place in Australia.
"We stand with modern Australia against these rallies - nothing could be less Australian," Home Affairs Minister Tony Burke said.
Queensland opposition leader Steven Miles has written to the premier seeking security assurances to "protect and support vulnerable multicultural communities" on Sunday.
The premier backed the right of people to protest but implored attendees against inciting violence.
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