Clacton MP Douglas Carswell initially clashed with party donor Arron Banks in front of journalists on the day Mr Farage signed Ukip up to Mr Banks’s umbrella leave.eu campaign.
Mr Carswell was apparently angered that Mr Banks had suggested the MP could be deselected if he did not join the campaign.
Further salvos were then exchanged through the media as Mr Banks told Sky News that Mr Carswell was “borderline autistic with some mental illness attached.”
He later apologised.
Mr Farage was forced to try and explain away the rift and why Mr Carswell is maintaining his connection to a rival group expected to campaign for a no vote - Business for Britain.
It was also suggested Mr Carswell had not been informed that Ukip was joining the leave.eu group.
Ukip’s endorsement comes as rival groups battle to be designated the official ‘no’ campaign by the Electoral Commission.
Mr Farage said he did not have a problem with Mr Carswell being part of Business for Britain but the group had not yet given a clear commitment to campaign for Britain’s EU exit which is why he was supporting leave.eu.
The incident was the lastest sign of tension between mr Farage and Mr Carswell who defected to Ukip last year and succesfully defended his seat at the General Election.
The pair also fell out when Mr Carswell refused to accept the full amount of public funding he could claim for the party.
Ukip will hold 300 meetings across the country as it seeks to build momentum behind the ‘no’ campaign before David Cameron has even completed his renegotiation of Britain’s EU membership.
Mr Farage rejected suggestions he should allow someone else to be the figurehead of the ‘no’ campaign because he could alienate some voters.
“Who is there? There ain’t nobody else so I’m going to have a go. And a couple of names that have been put to me if we stopped the first thousand people in Doncaster high street nobody would have even heard of them,” Mr Farage said.
But the Ukip leader added it would be a “terrible mistake” if the campaign was dominated by one individual.