More than 25,000 people in Manchester "did not exist" as far as the last census was concerned, according to new figures.
The census errors left Manchester £7.5m poorer
The city tops the UK league for discrepancies between the 2001 census and address lists, the Office for National Statistics (ONS) said on Tuesday.
ONS researchers revealed 25,700 people were missing from the city's population figures, because 14,000 addresses were not included in the census count.
It means Manchester City Council is expecting to win back £7.5m in government cash it missed out on, because the previous population figures were too low.
Work is currently also being carried out in Westminster in London, to establish whether similar errors were made there.
The new figures show an increase of 21,200 in Manchester's population for 2001, and a further 4,500 for 2002, taking the current estimated total population of the city to 422,300.
Original estimates revealed in 2001 were consistently disputed by the city council, which worked with ONS to develop the new figures.
Council leader, Richard Leese, said: "I am delighted that the work...has made a major contribution to the exercise which persuaded the national statistician to revise very significantly our estimate of population.
"We can now look forward to working with ministers to ensure that the £7.5m grant lost to the city for this year is restored over the coming months."
"We can [also] look forward to the new population estimate informing Manchester's Revenue Support Grant Settlement for 2004/5, so that we are not penalised again."
Despite the errors the Statistics Commission and Local Government Association insisted "the methods used in Census 2001 were the best available and no alternative approach would have produced more reliable results overall".
It said however, it is looking at methods to improve accuracy, including a system to provide independent corroboration of population estimates, by 2007.