Thousands of politicians and celebrities were allegedly targeted
The publisher of the News of the World paid £1m in court costs after its journalists were accused of involvement in phone tapping, it has been claimed.
The Guardian says three cases were settled out of court after journalists allegedly hired private investigators who obtained the information illegally.
It claims News Group paid £700,000 in damages and costs to the head of the professional footballers' association.
News International told the paper the case "means nothing to anyone here".
A spokesman said: "This particular case means nothing to anyone here, and I've talked to all the people who would be involved." The BBC has yet to receive a response from News International.
The Guardian claims up to 3,000 high-profile figures were targeted including model Elle Macpherson, former deputy prime minister John Prescott and the publicist Max Clifford.
The News of the World editor at the time, Andy Coulson, said: "This story relates to an alleged payment made after I left the News of the World two and a half years ago. I have no knowledge whatsoever of any settlement with Gordon Taylor."
Mr Coulson, now the Conservative Party communications director, declined to comment further.
A spokeswoman for David Cameron said the Conservative leader was "very relaxed" about the story.
"The ramping up of this story is ridiculous - this is about a payment made well after Andy (Coulson) left the News of the World," she said.
The Guardian says evidence alleging journalists used investigators to hack into the mobile phone messages and voicemails of numerous public figures was presented in High Court proceedings.
It claims the investigators went in search of information such as bank statements and tax records.
Mr Prescott told the BBC he had not been told his phone may have been tapped.
"I had no evidence of this though frankly, a lot of the stories in the paper were coming from information that was highly private," he said. "It's quite staggering really."
Former Labour home secretary Charles Clarke said the allegations were "sensational".
"If they are true, the behaviour of News International and some of its senior executives is disappointing, immoral and probably illegal," he said.
John Whittingdale, Conservative chairman of the Commons culture committee, said it would consider the alleged revelations tomorrow.
"I have to say I'm extremely surprised if it is the case that a payment of a million pounds has been made by News International to people who allegedly have had their phones intercepted by an investigator," he said.
"We were given an absolute assurance when we carried out an inquiry that only one journalist on News of the World had any knowledge of interceptions - Clive Goodman," he said.
Two years ago, Goodman, the News of the World's royal reporter, was jailed after pleading guilty to hacking into the phone messages of royal staff. A private investigator was also jailed and Mr Coulson resigned but he denied being aware of what was going on.
The Guardian now says it has evidence of repeated involvement by the group's journalists in illegal activity, which could open the way for police inquiries and legal action by the victims.
A Met Police spokesman said an investigation had been carried out into the alleged unlawful interception of telephone calls.
"Two people were charged and subsequently convicted and jailed. We are not prepared to comment further," he said.