Home Secretary Charles Clarke has denied some of the London bomb suspects were arrested last year.
Mr Clarke has vehemently denied the claims
French Interior Minister Nicolas Sarkozy said the UK delegation made the claim at an EU terrorism meeting.
Mr Clarke said the comments were "completely and utterly untrue", and said there had been no conversation on the issue.
Officials are adamant the men were not arrested and then released in order to break a wider network.
Mr Sarkozy said: "It seems that part of this team had been subject to partial arrest."
The French interior minister also said the explosives were thought to have come from the Balkans or eastern Europe.
But Mr Clarke said he was baffled by his French counterpart's comments.
"Mr Sarkozy was inaccurate, shall I put it gently, in suggesting that there had been a discussion of this kind because there was not," Mr Clarke told journalists.
"There is absolutely no foundation in them.
"Mr Sarkozy was a little late to the event today and I had a brief conversation in the corridor with him and had a discussion in the full council about some of these issues.
"In neither the full council discussion nor the discussion with Mr Sarkozy personally was there any exchange or discussion on this matter whatsoever."
He added: "I'm not aware of the allegations that Mr Sarkozy has made.
"The police are looking into the background of each of those individuals involved... very comprehensively.
"I simply don't know where he could have got that from to make his remarks.
"I'm sorry to be so blunt but that is the state of affairs."
Asked whether he had approached Mr Sarkozy to correct his comments, the home secretary said: "I haven't seen him yet. He left the council halfway through.
"He didn't feel it appropriate to stay until the end of the discussions, perhaps that is his style.
"He's a great leader for France and I wish him the best."
A French spokesman later said Mr Sarkozy had been speaking from his own information and not quoting Mr Clarke.
France's interior minister had not been referring to any of the four suspected bombers but to other members of a network to which they belonged, the spokesman added.
Mr Sarkozy said France was reimposing border controls after the attack.
Under the Schengen agreement, France does not normally operate border controls with other signatory countries.