Tory leader Michael Howard has accused the government of cutting asylum figures by telling officials to grant visas on the basis of forged documents.
Howard said an in-house inquiry was not good enough
At a rowdy prime minister's questions, Mr Howard said the immigration system was in chaos and there had to be an independent probe into "scam" claims.
Tony Blair said the claims were serious and would be investigated by officials.
But he denied the allegations had anything to do with falling numbers of asylum applications in Britain.
The latest allegations broke when James Cameron, a consul in the British Embassy in Bucharest, e-mailed the Conservatives with his concerns about the European Community Association Agreement (ECAA) .
The Tories have released documents showing the Home Office was warned about forgery worries 18 months ago over the migration scheme for prospective business people.
In the Commons on Wednesday, the two leaders traded figures on asylum, with Mr Howard saying government claims of halving asylum applications could not be trusted.
"They have been cut by telling officials to wave through other applications on the basis of forged documents," he told MPs.
The latest allegations are being investigated by senior immigration official Ken Sutton and officials have travelled to Bulgaria and Romania to pursue the inquiry.
Mr Howard said only an independent inquiry could inspire public confidence - a view shared by the Liberal Democrats.
He added: "The home secretary has lost control of his department, the immigration minister is clearly not up to the job and the government's immigration system is an utter and complete shambles."
Mr Blair accused the Tories of confusing immigration and asylum and said Mr Howard had failed to adopt the careful approach needed on such a sensitive issue.
The Tory claims over falling asylum claims could not be true as Bulgaria had never been a major source of asylum seekers, he argued.
Mr Blair continued: "It is important that we deal with this. There's been a very serious allegations, of fraud, in relation to these two countries. We will investigate as we should."
He urged the Tories not to prejudge that inquiry. The Home Office has stressed Mr Sutton's integrity and says he will be able to give "quick answers".
Home Secretary David Blunkett said on Tuesday he had suspended all visa applications from the two eastern European countries.
The Home Office later said that the move only affects a migration scheme for prospective business people.
The Romanian Embassy in London says its government called in the British ambassador in Bucharest to raise concerns about the move.
Mr Cameron has now been suspended from his post but some of his letters featured in a Tory dossier released in an attempt to raise the heat on Immigration Minister Beverley Hughes.
In October 2002, he told an immigration officer that the Home Office was approving business applications from people not thought up to their supposed trade, including a one-legged roof tiler and an electrician who had lost his fingers.
A month later, senior Foreign Office official John Ramsden wrote to Chris Mace, the deputy director general of the Immigration and Nationality Directorate saying that Britain's entry controls were being "completely undermined" by an "organised scam".
The letter came after Mr Ramsden had visited Bulgarian capital Sofia.
Ms Hughes on Tuesday rejected calls for her to quit, telling MPs: "I am neither incompetent nor dishonest and I intend to carry on doing my job as long as the prime minister and the home secretary want me to."
A hotline has been set up for other immigration officials to raise worries without fear of suspension.
Last week an internal inquiry found a decision to waive checks in Sheffield on ECAA applications from eastern Europeans had been taken by junior staff without ministers' approval.
Steve Moxon, the whistleblower who raised those concerns, will be grilled on Thursday by the Home Office's human resources director about whether he acted in the public interest.