Lib Dem leader Sir Menzies Campbell has made an "an unqualified apology" to the Commons for saying a prisoner eligible for deportation had "walked free".
He had called for Home Secretary Charles Clarke to resign after claiming a Nigerian had been freed from Holme House Prison, Stockton-on-Tees.
He later said he had been misinformed by an "apparently reliable source".
Sir Menzies's Commons question came a day after the Home Office said it had lost track of 1,023 foreign convicts.
He asked Prime Minister Tony Blair: "How can the home secretary remain in office? How can the prime minister not ask for his resignation?"
But a Home Office statement later said the Nigerian man remained in detention, adding: "We are confident that no further foreign nationals who served custodial sentences will be released without being considered for deportation."
Some 1,023 foreign prisoners, including three murderers and nine rapists, were released between February 1999 and March 2006.
An Association of Chief Police Officers team is running computer checks to try to track down the missing convicts.
Home Secretary Charles Clarke has apologised for the "deeply regrettable" failure, but rejected calls for his resignation.