Ford, who was ordered removed from office on Monday for violating municipal conflict of interest rules, became animated during a council debate about a development on Queen Street West.
Ford was upset that developers were asked to pay higher development fees in exchange for area improvements.
"All I'm saying is that looks like a shakedown, call it what you want," Ford shouted at Coun. Adam Vaughan, whose ward includes the site of the proposed development.
"You can not go up to developers and say I want a million dollars when staff says they don't want it. That's a problem ... that's not the way you do business down here."
His brother Doug Ford also engaged in angry shouting with council members.
Vaughan, a left-of-centre councillor who is tipped as a possible mayoral candidate, said everything about the development fees was above board and vetted by city lawyers.
"The mayor has found himself in trouble with his choice of words before, they're inaccurate, they're offensive and they're wrong," he said.
Ford later apologized for his "shakedown" remark but Coun. Karen Stintz said the incident reflects poorly on the city.
"It is embarrassing and I think it does speak to the need that we have as a city to resolve this matter with the mayor and quickly because I don't think we can continue to have the kind of discourse that has happened over the last couple of days."
If Ford's application to appeal the judge's conflict of interest decision fails, he will be removed from office next week.
It's not clear whether Ford will be able to re-seek the mayor's chair right away, or will have to wait until the 2014 municipal election.
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