Cameron, who flew back from Africa early for the emergency session, defended his decision to hire former News of the World editor Andy Coulson as his communications chief, saying Coulson's work in government had been untarnished.
Coulson was arrested this month in connection with allegations that reporters at the tabloid intercepted voice mails of celebrities and crime victims to get scoops. Cameron reminded lawmakers that Coulson has yet to be found guilty of anything.
But the prime minister also made his strongest effort yet to distance himself from his former aide.
"With 20/20 hindsight, and all that has followed, I would not have offered him the job, and I expect that he wouldn't have taken it," Cameron told lawmakers who packed the House of Commons. "You live and you learn, and believe you me, I have learnt."
Cameron then turned the spotlight on the Labour Party, saying that most British politicians had tried to court media baron Rupert Murdoch - whose News Corp. owned the defunct News of the World and still owns three other British newspapers.
The prime minister warned that Labour should be careful before casting stones about hiring choices. Former Labour Prime Minister Tony Blair's communications director, Alastair Campbell, was accused of exaggerating government documents in the lead-up to the Iraq war, and the party's former special adviser Damian McBride quit amid allegations he circulated scurrilous rumours about political opponents.
"You've still got Tom Baldwin working in your office!" Cameron exclaimed, referring to Labour's political strategist who has been accused of illegally obtaining private banking information in 1999 while working as a journalist for The Times, another Murdoch paper. Baldwin could not be reached for comment.
Labour was in power when the phone hacking scandal broke in 2005 over a News of the World story about Prince William's knee injury - information that royal household staff believed could have only come from illegal voicemail intercepts. The scandal has since embroiled top politicians, police and journalists.
A parliamentary committee investigating the widening scandal released a scathing report on Wednesday accusing Murdoch companies of "deliberately trying to thwart a criminal investigation" into the allegations and lambasting the London Metropolitan police for its failed inquiry.
"We deplore the response of News International to the original investigation into hacking," said the Home Affairs committee, which has been grilling police officials about their decision not to reopen the hacking investigation in 2009 when other allegations came to light.
And it seems more is yet to come.
Only some 200 of the nearly 4000 people whose information is believed to have been targeted have been notified by police, and detectives have started a separate inquiry into whether other news organizations over the years have breached data privacy laws.
Scotland Yard said on Wednesday it was increasing the number of staff assigned to the phone-hacking inquiry from 45 to 60 to deal with a surge of inquiries and requests for assistance from the public and lawyers.
Among the evidence police want to examine are emails and other documents from an internal investigation into hacking conducted in 2007 by a law firm hired by News International, the British newspaper division of Murdoch's global News Corp. The firm, Harbottle and Lewis, had maintained client confidentiality meant it could not hand over the file.
On Wednesday, News International said it instructed Harbottle and Lewis to answer questions from police and lawmakers.
Murdoch flew out of London on Wednesday, a day after he and his son James were quizzed for three hours by a parliamentary committee investigating wrongdoing by the News of the World.
The embattled mogul got some good news when a billionaire Saudi prince who controls the biggest share of News Corp. outside the Murdoch family voiced his support.
Prince Alwaleed bin Talal commended Rupert and James Murdoch for tackling problems at the company and for cooperating with investigators. Alwaleed, who controls 7 percent of News Corp., said the company remains "a valuable and long term investment."
Already 10 people have been arrested, including Coulson, who was editor at News of the World when royal reporter Clive Goodman and private investigator Glenn Mulcaire were arrested and jailed in 2007 in connection with the Prince William story.
Police dropped their investigation into the hacking claims in 2007 once the men were prosecuted, and Coulson quit the paper shortly after. It was then that Cameron, who was Conservative opposition leader at the time, hired him as his communications chief.
Police reopened the hacking investigation in January and both police and News Corp. now acknowledge hacking was far more widespread than previously admitted.
The scandal exploded two weeks ago when it emerged that News of the World had intercepted - and deleted - the voicemail messages of Milly Dowler, a 13-year-old who was kidnapped in 2002 and later found murdered.
The uproar forced Murdoch to shut the 168-year-old News of the World and abandon a bid to take control of lucrative British Sky Broadcasting, raising questions of whether police accepted bribes to give reporters' tips and highlighting the way politicians sought to curry favor with the News Corp. media empire.
Cameron said on Wednesday that a special panel would be set up to investigate practices at other news organizations and the relationship among media organizations, politicians and police.
"The problem has been taking place over many years - the problem is for both our main parties and the problem is one the public expect us to stop playing with and to rise to the occasion and deal with it for the good of the country," Cameron said.
He adamantly denied, however, that anyone on his staff ever tried to influence the hacking investigation.
"To risk any perception that No. 10 (Downing Street) was seeking to influence a sensitive police investigation in any way would have been completely wrong," he said.
Cameron has acknowledged meeting with News Corp. executives more than two dozen times between May 2010 and this month, including several meetings with Rebekah Brooks, a News International executive who has been arrested in the scandal. A friend and neighbour of Cameron's, Brooks attended his birthday party in October.
Cameron told lawmakers he was not involved in the government's decision to approve the BSkyB takeover and "I never had one inappropriate conversation" with Brooks.
Cameron's meetings with News Corp. executives were criticized in Parliament by Labour leader Ed Miliband, who said Cameron had made a "catastrophic error of judgment" in hiring Coulson.
Miliband also reminded Cameron that Deputy Prime Minister Nick Clegg had warned against bringing Coulson into Downing Street. Clegg sat stone-faced during much of Wednesday's loud and rowdy session.
News Corp. announced Wednesday that it had stopped payments to cover Mulcaire's legal expenses, a day after Murdoch told lawmakers in a special parliamentary committee hearing that he would seek to stop the payments. Mulcaire's lawyer, Sarah Webb, declined to comment on the development.
The saga captivated audiences from America to Murdoch's native Australia on Tuesday, as Murdoch endured a three-hour grilling by UK lawmakers - interrupted by a shaving cream-pie attack from a protester.
The media baron said he had known nothing of allegations that staff at News of the World hacked into cellphones and bribed police to get information on celebrities, politicians and crime victims.
He also said he had been humbled by the allegations and apologized for the "horrible invasions" of privacy.
Police on Wednesday charged Jonathan May-Bowles, 26, with the shaving cream attack.
A judge, meanwhile, awarded actor Hugh Grant - one of the most prominent celebrity critics of the Murdoch empire - the right to see whether he was one of the targeted celebrities. Others who allegedly had phones hacked include Sienna Miller and Gwyneth Paltrow.
