The first-term MP was expelled from the parliamentary Liberal party after she took part in an anti-transgender rally in March that was gatecrashed by a group of masked men who performed Nazi salutes.
She has issued several defamation concerns notices to Mr Pesutto relating to his post-event comments, alleging he publicly accused her of being a Nazi sympathiser and used the claim to bully and threaten her with expulsion.
Mr Pesutto denies he accused the now independent MP of being a Nazi or having Nazi sympathies.
In September, a three-hour mediation session between the pair failed to reach an outcome.
She had been seeking an exoneration from Mr Pesutto, her return to the Liberal party room and financial restoration.
Mrs Deeming said she made one last attempt to mediate, offering to meet with Mr Pesutto and state party president Phil Davies on Sunday afternoon.
"Unfortunately, the mediation failed," she said in a statement on Monday.
"It is therefore with great regret as a current Liberal Party member, that I am now left with no option but to lodge my defamation case against Mr Pesutto in court.
"For the sake of my family, I have to bring this matter to a conclusion as it has dominated our lives for most of this year."
She vowed no Liberal or taxpayer funds would be used in her legal action.
Mr Pesutto's office has been contacted for comment.
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