The Tibetan spiritual leader was due to address a business convention on Friday, but it has been claimed that Chinese officials have requested that the event be cancelled.
Fabian Hamilton, the Labour MP for Leeds North East and chairman of the all-party parliamentary group for Tibet, described the reported demand as "bully-boy tactics".
He told the BBC: "I find it distasteful, to say the least, that two representatives of a country whose human rights record is appalling, where freedom of speech is not allowed and where there is no real democracy, come to the city of Leeds and tell our elected officials … that they can't do what they think is best for the city under pain of economic sanction."
Asked whether the Dalai Lama's visit to Leeds would have any impact on China's participation in the Olympics, a foreign ministry spokesman in Beijing said: "We hope the British side stop making mistakes again and again, which undermine China's interests. China-UK relations have been affected by the recent meeting between the British leader and the Dalai Lama. The responsibility lies with the British side."
About 300 athletes, coaches and support staff representing China are due to be based in the West Yorkshire city to prepare for the Games.
Leeds council distanced itself from the convention but said it was aware of “sensitivities” around the event.
Tom Riordan, chief executive of the council, said: “The Yorkshire International Business Convention is a private event not organised by Leeds City Council.
“Whilst we are aware of some sensitivities around this year’s convention, as it is not a council event we do not feel it is appropriate for us to make any further comment.”