A "climate of fear" has been used to undermine civil liberties in the wake of the 11 September attacks, Lib Dem leader Charles Kennedy has said.
Tony Blair tested the biometric technology on Monday
In a speech in London on Monday, Mr Kennedy argued government plans for compulsory identity cards were a classic example of the problem.
He also claimed that stop and search powers introduced under terror laws were being misused by the police.
Labour has hit back at the speech, calling the Lib Dems "soft on crime".
Speaking at the National Liberal Club, Mr Kennedy said the government should stop trying to micromanage public services.
But the Lib Dems also had to guard against attempts by an "over-mighty state" to undermine people's freedoms, he argued.
"In this post-9/11 world, a climate of fear is being created which is being
used to threaten our civil liberties," he said.
"Extraordinary threats - like those posed by international terrorism - may
require us, in times of emergency and for limited periods, to find a different
balance between our hard-won liberties and our security.
"But the correct response to such threats should not be, as the current home
secretary appears to think, the abandonment of some of the liberties that
generations of Britons have relied upon.
"Hard-won rights, once lost, may never be regained."
Mr Kennedy cited the detention of international terrorism suspects without trial where they cannot be returned to their home countries.
The law is currently being examined by the law lords.
But Mr Kennedy urged ministers to secure alternative ways of combating the terror threat which did not mean opting out of the European Convention on Human Rights.
He also accused ministers of changing their justification for identity cards day by day - in much the same way as they had done over the Iraq war.
"It suggests the government itself is not quite sure of what it's trying to achieve," he said.
Without clearly defined aims, there was little chance the plans would pass the test of whether their benefits would outweigh the impact on civil liberties, he continued.
Criticising the way stop-and-search powers had been used, he said the number of Asian people being stopped had trebled.
But only 1% of those stopped were arrested, suggesting the searches were not based even on reasonable suspicion.
Speaking before the speech, Labour general election coordinator Alan Milburn attacked the Lib Dem law and order stance.
"Labour has taken tough measures to crack down on crime and anti-social behaviour, to tackle truancy, graffiti and vandalism, and to break up teen gangs.
"The Lib Dems have repeatedly tried to block these measures. Their plans would take powers away from the police and local authorities to take on the vandals and bullies."