Labour MP Trevor Mallard blogged about the rumour.
He wrote: " Wellington cafe gossip suggests that the Nats are so afraid of (Labour MP) Charles Chauvel winning the next three way contest for Ohariu... that they have decided to offer the Washington post to Peter Dunne.
"From their perspective pretty logical." Mr Dunne, who has held the seat since 1984, said the rumour was untrue.
"If this is the sort of thing is the best Labour can come up with in a time of international economic recession, then it's no wonder they are 20 percent behind in the polls.
"They have obviously learned nothing from their muckraking over Richard Worth."
Mr Dunne held the seat in last year's general election with 12,303 seats. Close behind was Mr Chauvel with 11,297 followed by National's Katrina Shanks on 10,009.
