Matthew Lewis, a Queen Mary, University of London student, said he was looking for a blond wig, "pink pyjamas, a teddy bear and a vial of fake blood" for a fancy dress costume.
The activist, formerly the chairman of the Staffordshire Conservative Future (CF) group, posted the comments on his Facebook page ahead of a New Year bash.
Other young people from CF joined in the joke, with one responding: "Is this a cunning (Baldrick style) plan to obtain the reward money?"
On New Year's Day, after the party, Mr Lewis wrote on Facebook: "There was a brief moment when I thought I might have gone too far with elements of the costume, but it was ok".
He added that another guest at the party was dressed as Baby P, the toddler who died after a catalogue of horrific abuse.
Mr Lewis' comments have been condemned by Tory chairman Caroline Spelman, who branded Mr Lewis's behaviour "totally unacceptable" and confirmed he had been expelled.
"This offensive behaviour is not only shocking but intolerable and completely unacceptable," she said.
"There is no place for this sort of person in the party."
Meanwhile, Clarence Mitchell, the spokesperson for Madeleine's parents Kate and Gerry McCann said the couple would be greatly hurt by the student's sick joke.
He said: "The offensiveness of this activist's actions is almost beyond belief.
"I know Gerry and Kate will be grateful that the Tory Party has taken swift and appropriate action by ejecting him from the party.
"His actions are not only disgraceful in themselves, they will also cause great hurt to Kate and Gerry. I feel it is appropriate that he now apologises both privately and publicly to them.
"It is a complete disgrace that Madeleine's name and image should be made fun of in this way."
The 3 Arguidos: 9/1-Independent: Tory who dressed as Maddie is expelledComment by Dr Paulo Sargento, forensic psychologist, University professor, and author translated here
Don't Fancy Your Dress - Guido Fawkes
No mention of outrage for Baby P