Downing Street has defended John Scarlett after the Lib Dems claimed he could no longer "command the necessary public confidence" to lead MI6.
Mr Scarlett takes up the top job at MI6 on Monday
The former chairman of the Joint Intelligence Committee has taken up his post as head of MI6 on Monday.
It was alleged at the weekend he tried to persuade weapons inspectors in Iraq to harden up a report on their hunt for weapons of mass destruction.
But No 10 said: "I would deny there was an attempt to mislead the ISG."
Asked if the Prime Minister still thought the appointment of Mr Scarlett as MI6 boss was a good idea, a spokesman said: "Yes."
The spokesman refused to confirm or deny the allegation that Mr Scarlett sent an email to the Iraqi Survey Group asking them to insert so-called "golden nuggets" of intelligence into their report on the search for WMDs in Iraq.
But the spokesman added: "There is no question of HMG or any of her agencies - and that includes John Scarlett and the JIC - seeking to mislead the ISG."
Mr Scarlett, as head of the Joint Intelligence Committee, was in charge of the controversial government dossier on Iraq's weapons of mass destruction, published in September 2002.
The dossier was criticised in the recent Butler report, although the report specifically said Mr Scarlett should take up his post with MI6.
Liberal Democrat foreign affairs spokesman Sir Menzies Campbell told BBC Radio 4's Today: "It seems to me that the controversy... is going to follow Mr Scarlett into this most important and significant appointment in which the public has to have confidence.
"I find it very difficult to see how Mr Scarlett can command the necessary public confidence.
"I'm not one of those who makes ritual calls for resignations but I've come to the view that so controversial now is Mr Scarlett that the necessary element of public confidence will be lacking."
Mr Campbell called for a select committee of MPs to be set up to deal with "intelligence matters".
An unnamed member of the Iraqi Survey Group told the Mail on Sunday Mr Scarlett had requested the ISG report on inspectors' hunt for weapons of mass destruction include details of 10 claims about Saddam Hussein's supposed arsenals, which had already been shown to be untrue.
It said his request had been rejected, but pressure from the US and UK
had led to the ISG producing only a bland 20-page document rather than a detailed
200-page analysis of the failure of their 1,400-strong team to find any trace of
weapons of mass destruction in Iraq.
At the time Mr Scarlett
was chairman of the Joint Intelligence Committee, which co-ordinates
Britain's spying efforts.
Among the 10 so-called "golden nuggets" reportedly requested by Mr Scarlett were
claims Iraq had had a secret smallpox programme and mobile chemical weapons laboratories.
Mr Scarlett's alleged suggestions would have been made just weeks after Lord Hutton cleared the government of "sexing up" the evidence of Iraq's weapons of mass destruction in its September 2002 dossier, which was signed off by Mr Scarlett in his role as JIC head.
Both US president George Bush and Prime Minister Tony Blair set up inquiries into the failings of intelligence on Iraqi weapons of mass destruction in the
run-up to war, following outgoing ISG head David Kay's announcement he
did not believe weapons stockpiles would be found.