Home Secretary John Reid has told MPs he will clear the backlog of failed asylum seekers within five years.
'Inadequate records mean officials do not know exact numbers'
It follows claims ministers greatly underestimated the number of failed asylum seekers living in Britain.
Last year the National Audit Office estimated that the figure could be as much as 283,000 - but at the time the Home Office insisted that was too high.
Now a trawl of files in the Immigration and Nationality department has produced between 400,000 and 450,000 case files.
Mr Reid made his pledge as he announced a shake-up of his department in the Commons.
Home Office sources say that because of poor record keeping, officials are unable to calculate the exact number of failed asylum seekers, but the figure is far higher than previous estimates.
Mr Reid insisted it was possible to clear the backlog in five years because of Labour reforms to the system - rejecting opposition claims the target was "implausible".
"We have made massive progress in recent years to reform the asylum system," he told MPs.
These included cutting applications by 72% and reducing the time it takes to process applications from 22 months to two months, said Mr Reid.
"It is just not true my predecessors did not have major achievements," he added.
But Lib Dem home affairs spokesman Nick Clegg attacked the target as "bold and somewhat implausible".
Under the changes unveiled by Mr Reid, the Immigration and Nationality Directorate is to be made into a government agency at arm's length from the Home Office.
The government has previously refused to say how long it estimates will be needed to clear the asylum backlog.
Backlog of failed asylum seekers due to be removed from the UK: 155,000-283,000
Time the PAC says it will take to clear the backlog: 10-18 years
Voluntary departures from UK in January and February: 770
Time taken to decide asylum application: 90% made within two months under new rules
But a recent report by the Commons Public Accounts Committee (PAC) warned that it would take between 10 and 18 years.
BBC political editor Nick Robinson said he had been told that the filing system in the immigration department "sometimes consists of cardboard files on a windowsill covered in Post It notes".
He said officials did not know if the contents were duplicated, if people had died or moved or are now allowed to stay in the UK.
Ministers will have to inform Parliament of the error since Sir John Gieve, the ex-permanent secretary at the Home Office, gave the inaccurate information to a committee of MPs.
It was also Sir John, now deputy governor of the Bank of England, who was forced to apologise to the same committee about the number of foreign prisoners who could and should have been deported.
He made the stark assessment following the release of more than 1,000 foreign prisoners without consideration for deportation, which led to the sacking of Charles Clarke as home secretary in May.
The BBC understands that Mr Reid is also set to announce funding for 8,000 new prison places - boosting current capacity in British jails from around 78,000.
No timetable on when these new prison places will be introduced has been disclosed.
Under existing plans, an extra 1,000 places would become available from next June and by 2007, the capacity would reach 80,400. Ministers have concluded that this is inadequate.
The Treasury insists negotiations over the Home Office budget for the next three years have not been reopened.
It claims the Home Office has not spent all its capital budget and will make 3% annual efficiency savings.