The Cabinet is considering allowing the tapping of MPs' telephones, Defence Secretary John Reid has acknowledged.
Mr Reid said scrapping the rule would not be taken lightly
The covert surveillance has been banned for 40 years under a convention known as the Wilson Doctrine.
Mr Reid told ITV1's Dimbleby that the proposal to lift the ban was suggested by the Interception of Communications Commissioner Sir Swinton Thomas.
But the Liberal Democrats' Norman Baker said MPs were entitled to protection from the monitoring of phone calls.
"I think in a democracy it's extremely important that members of Parliament can operate without the suspicion that what they say on the telephone can be collected by the security services and relayed to the government," he told BBC Radio 4's Broadcasting House.
"And there can be no guarantee if MPs are subject to phone-tapping that they won't have information passed on for political reasons to the government of the day".
The Wilson Doctrine was named after Harold Wilson, the Labour Prime Minister who established the rule in 1966.
He gave MPs a pledge that their phones would not be tapped and subsequent prime ministers have regularly confirmed it remains in place.
According to the Independent on Sunday, Tony Blair is preparing to announce the scrapping of the ban as part of an expansion of MI5 powers after the July 2005 London bombings.
New powers to monitor e-mail and other communications were brought in in 2000 as part of the Regulation of Investigatory Powers Act.
In a written Commons statement in December, Mr Blair said he had received advice on "possible implications" of the act on the Wilson Doctrine from Sir Swinton.
Mr Reid said the recommendation was that MPs should not remain exempt from the 2000 legislation.
He said: "Cabinet quite correctly decided that this was worthy of deep reflection and more consideration.
"So that is the position. It's not something that's been brought forward at the behest of the prime minister."
The defence secretary said "no one would take such a change lightly and I know that neither the prime minister nor my Cabinet colleagues would take such a change lightly".