Video clips showing a dozen people gathered in Councillor Lynnie Hinnigan's garden were posted on May 9 – days before any of the tough lockdown measures were eased.
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Ms Hinnigan told the Liverpool Echo that the event for birthday was not a party and that she had stayed away from family and friends.
The video which was posted shows a large number of chairs spread out across the garden and bunting and balloons hanging off the fences.
Ms Hinnigan said the event had been organised secretly by her daughter – and she had stayed inside the entire time.
She said: "I really wasn't aware that it was happening, it was genuinely a surprise.
"Everyone is finding lockdown hard, not seeing family and friends, but everyone should still follow the rules, stay alert, stay safe and socially distance, which is exactly what I told my daughter and the reason I never left the house.
"I am sorry if this has hurt anyone as it was never mine or my daughter's intention.
"Many other families in our city have struggled throughout this period. We still need to follow the guidance until we can meet face to face again."
The local Labour group said Councillor Hinnigan had "voluntarily and temporarily" stepped down ahead of an investigation.
Chief whip of the Liverpool Labour group councillor Ruth Bennett said in a statement: “We have received emails regarding Lynnie Hinnigan and can confirm that she is being investigated.
“In the meantime, she has, in agreement with the mayor, voluntarily and temporarily stepped down from her council roles with immediate effect during the investigation into her actions.”
Richard Kemp, the leader of Liverpool city council’s Liberal Democrat opposition, called for Hinnigan to resign. He said on Twitter: “Those of us in public life must set an example not find excuses.”
Lockdown measures were not eased until days after the apparent party on May 13.
The current measures do not allow for people to see more than one person from another household at a time.
People will be allowed to gather in groups of up to six people in gardens from Monday, the Prime Minister announced this week.