You can model a feedback system with distortion by adding a distortion voltage to the output, done here via adder X3 which adds a "Disto" voltage.

\$ A_{ol} \$ is the open loop gain.
\$ \beta \$ is the feedback network gain (usually <=1)
\$ D \$ is the open loop distortion added by the amp, referenced to the output.
Quickly doing the math...
\$ Vout = \frac{A_{ol} V_{in} + D}{1+A_{ol} \beta} = V_{in} \frac{1}{\beta + \frac{1}{A_{ol}}} + D \frac{1}{1+A_{ol} \beta} \$
In other words, distortion introduced by the amp is reduced by a factor \$ 1+A_{ol} \beta \$.
Doesn't the condition of stability state that A×beta should be less than 1
Nope, that's not the right condition.
The Nyquist criteria is that, at the unity gain frequency where \$ | A_{ol} \beta | =1 \$, the phase lag of \$ A_{ol} \beta \$ should be less than 180°. Preferably with some good phase margin, like 45°, so the usual would be "less than 135°".
This criteria does not apply at frequencies where \$ | A_{ol} \beta | \$ is not equal to 1. With the classic opamp, at lower frequencies, which are the frequencies for which the circuit is useful and provides amplification, \$ | A_{ol} \beta | \$ is higher than 1 and rising with decreasing frequency. At higher frequencies, \$ | A_{ol} \beta | \$ keeps falling and stays lower than 1.
Here's a pic from an appnote. Suppose we have this opamp and wire it with a feedback network giving the gain drawn in green:

An intuitive way to grasp the concept is that, at a given frequency, the opamp gives you a value of open loop gain Aol. This is your budget, and you can spend it either on the gain you want your circuit to achieve, or on distortion reduction, but not both.
If you increase gain by a factor N, then \$ \beta \$ is divided by N, and \$ A_{ol} \beta \$ is also divided by N, increasing distortion by N.
This means the opamp should be chosen carefully, and if \$ A_{ol} \beta \$ is low, more linear circuits that generate lower distortion to begin with can be useful.
Basically, with a given fixed opamp, more gain usually means more distortion.
If the opamp is discrete and is designed for the application, or if a decompensated opamp is used, then the unity gain frequency can be adjusted, and \$ Aol \$ can be boosted without compromising stability for the specific value of \$ \beta \$ chosen. In this case, distortion does not increase with increasing gain, as long as the gain is not variable.
Note the \$ A_{ol} \beta \$ that applies is the value at the frequency of the distortion, not the one at the frequency of the signal. So if the output stage is underbiased and generates a plentiful spray of high order crossover harmonics, sitting at higher frequency than the signal, then feedback won't work very well on that.