Home Secretary John Reid has damned his department's immigration operation as "not fit for purpose" with "inadequate" leadership and management systems.
Mr Reid says he has had to deal with 'a tidal wave of events'
Other failings showed the Home Office could be "dysfunctional" and "wholesale transformation" was "probably" needed.
Although he did not rule out splitting the Home Office, he told MPs there was some logic to its current structure.
The Conservatives said they were not convinced the home secretary could sort the problems out.
Labour ex-minister John Denham meanwhile called Mr Reid's comments "a fairly stark assessment of the state of the Home Office".
Mr Reid told the Commons home affairs committee that jobs could still go after 1,019 foreign prisoners were released without deportation being considered.
But Tory opposite number David Davis said: "It will be alarming for the public to hear that, 10 months after the government were made aware of this problem, there might be a whole new group of foreign criminals on our streets, putting them at risk."
Mr Reid said he had had to deal with "a tidal wave of events" since he became home secretary a fortnight ago.
While his department had been trying to cope with the problems of mass migration, "our system is not fit for purpose", he said.
"It's inadequate in terms of its scope, it's inadequate in terms of its information technology, leadership, management systems and processes," he said.
Mr Reid said the Home Office was in a state of transition from a paper-based system to a technology-based one.
He said he believed "we can carry out and must carry out" a fundamental overhaul of the Immigration and Nationality Directorate (IND).
Staff had been given an eight-point action plan on which to work. "It's not my job to manage this department - it's my job to lead this department."
REID'S EIGHT PRIORITY AREAS:
Ensure individuals in contact with criminal justice, immigration and asylum systems have a unique personal number
Make it an obligation for suspects and criminals to declare their nationality
Instruct all agencies to refer other categories of foreign national cases to immigration directorate
Order officials to audit-trail all policy criteria governing which individuals should be considered for deportation
All decisions on deportation to be made according to the most robust interpretation of international obligation requirements
Clear procedures demanded for dealing with foreign national prisoners held in Scotland and Northern Ireland
Officials to make arrangements for considering deportation of mentally disordered offenders
Enhance arrangements to facilitate the return of prisoners earlier in their sentence
Asked about the cabinet secretary's suggestion last week that no civil servants were likely to lose their job over the foreign prisoner releases, he said: "Don't count on it."
He said he did not believe the Home Office was "intrinsically dysfunctional... but I do believe from time to time it is dysfunctional in the sense it doesn't work".
He said he wanted to move to a situation where foreign nationals, who had abused the privilege of being in this country by being convicted of a serious offence, "should be deported - full stop".
He said he would not be opposed to publicising the names of the most serious offenders still on the loose if he was asked by the police.
But ex-Tory leader and former Home Secretary Michael Howard said Mr Reid's comments were the "most terrible indictment" of the three men who had been in charge of the Home Office since Labour came to power.
'Years of neglect'
"I believe the Home Office was fit for purpose when I left it in 1997," he told BBC2's Daily Politics.
Mr Reid gave his withering assessment of sections of his department shortly after revealing that 85 of the 186 serious foreign offenders who were released from prison without being considered for deportation since 1999, were still at large.
Of the 37 "most serious" offenders, 27 were in jail, including four murderers, and two were thought to be dead.
During the committee hearing Lin Homer, director general of the Immigration and Nationality Directorate (IND), revealed that 20 of the foreign prisoners were known to have been re-convicted of "more serious" offences after their release.
Six were for sex offences - but not against children - three for violence, 11 for actual bodily harm and grievous bodily harm.
Mr Reid also used the platform to defend his decision to switch Immigration Minister Tony McNulty and Police Minister Liam Byrne, saying their new roles fitted their respective talents.