A study from the London School of Economics has estimated there are 725,000 foreigners living illegally in Britain.
The figure is 81 per cent more than the last Home Office estimate of 430,000 illegal migrants, which was made public in 2005.
BBC's Panorama programme last night claimed that at current rates of deportation, it would take 34 years and cost £8 billion to clear the backlog of people who are currently in the UK illegally.
The Home Office defended its estimate of the scale of illegal immigration, insisting that the 2005 figure was "only an estimate and should not be seen as a definitive figure".
A spokesman said: "No Government has ever been able to produce an accurate figure for the number of people who may be in the country illegally.
"By its very nature it is impossible to quantify accurately, and that remains the case."
The news has fuelled calls for an "amnesty" on illegal immigration, effectively allowing those who are already in the UK to stay here.
Boris Johnson, the Mayor of London, said the best way to deal with the backlog was to say that everyone here illegally would be able to work officially and eventually gain full citizenship.
He said: "If people are going to be here and we've chronically failed to kick them out it's morally right that they should contribute in their taxes to the rest of society."
Mr Johnson is on a collision course with his own Conservative party, which opposes the plans.
Damian Green, the shadow immigration minister, said: "The problem with amnesties is that they store up trouble for the future as people will always expect another one.
"The long term effect of an amnesty is therefore to encourage more illegal immigration."
Sir Andrew Green, chairman of the Migrationwatch campaign group, said: "We have the biggest recession in memory getting under way, two million unemployed, heading up for three million.
"Is it really suggested that British jobs should go to illegal workers? It just makes no sense at all."
But Austin Ivereigh, spokesman for Strangers Into Citizens, which campaigns for long-term migrants to be given citizenship, said: "They've ended up here. They've put down roots. Their children are in our schools. They're often working.
"We need to call them out of the shadows so they can play their part in society, they can pay taxes. This is a move that benefits everyone."
Phil Woolas, the immigration minister, rejected the "earned amnesty" plan, saying it would only lead to more illegal immigration.
He said: "What unfortunately would happen is that people traffickers and others would see that as a pull factor to get people to the United Kingdom illegally and we would end up with a bigger problem not just for our society, but for the people themselves involved."