Prime Minister Tony Blair has been interviewed by police investigating cash for honours allegations.
Mr Blair was questioned for almost two hours by police
Mr Blair was not interviewed under caution and he was not accompanied by a lawyer, his spokesman said.
The probe was sparked by revelations Labour was given secret loans ahead of last year's election. Some donors were subsequently nominated for honours.
Assistant Commissioner John Yates, of Scotland Yard, has said he expects to complete his inquiry next month.
He will then deliver a report to the Crown Prosecution Service, who will decide whether to prosecute any individuals in connection with the affair.
It is thought to be the first time a serving prime minister has been questioned by police conducting a criminal investigation.
Mr Blair was interviewed by two police officers, but not Mr Yates. Scotland Yard said its investigation was continuing.
Mr Blair's official spokesman said the interview, which lasted for about two hours, took place earlier after his weekly Cabinet meeting.
He emphasized that there was no deliberate plan to "bury bad news" by holding the interview on the same day Lord Stevens released his report into the death of Princess Diana.
"Categorically there was no linkage to other events," he said. It is understood Mr Blair chose the day of the interview.
Mr Blair left Number 10 at 1430 GMT and is now in Brussels for a meeting of the European Council.
Mr Blair was interviewed as a witness, not under caution, which means he is not currently being treated as a suspect.
Police have not indicated whether they will need to ask him further questions.
Mr Blair's spokesman said: "The prime minister explained why he nominated each of the individuals and he did so as party leader in respect of the peerages reserved for party supporters as other party leaders do.
"The honours were not, therefore, for public service but expressly party peerages given for party service.
"In these circumstances that fact that they had supported the party financially could not conceivably be a barrier to their nomination," he said.
The inquiry was prompted by a complaint from the Scottish National Party, and has since widened to include other parties at Westminster.
DEC 14 TIMETABLE
0900: Cabinet meeting
1100: Press briefing by PM's official spokesman, who says there has been "no change" when asked whether Mr Blair had been interviewed by police - a comment he has repeated for weeks
Approx 1100: Police begin questioning PM for just under two hours
1320: Journalists alerted by e-mail about a briefing by PM's spokesman
1330: PM's official spokesman announces police questioned PM
1430: PM leaves Downing St for European Council meeting in Brussels
1550: Downing Street spokesman refuses to elaborate on earlier statement
"Given that the SNP made the complaint about people nominated for peerages by the prime minister you would expect that the police would ask to see the PM as their inquiries come to a conclusion," the PM's spokesman added.
About 90 people have been interviewed by the police during the honours probe. Three people have been arrested but no charges laid. All deny any wrongdoing.
Health Secretary Patricia Hewitt, former party chairman Ian McCartney, former Cabinet minister Alan Milburn, ex-science minister Lord Sainsbury, and ex-Tory leader Michael Howard are among those to have been questioned as witnesses.
The men who lent money to Labour and were then nominated for peerages are:
- Barry Townsley, a stockbroker who has also donated money towards a city academy school
- Sir David Garrard, a property developer who also donated money to a city academy
- Dr Chai Patel, chief executive of Priory Clinics
- Sir Gulam Noon, who says he was advised to keep a £250,000 loan secret, and that he was blocked from joining the House of Lords once the loan came to the attention of the Lords appointment commission.
SNP MP Angus MacNeil, whose complaint sparked the investigation, said the questioning of the PM "will be shaking the very foundations of Westminster".
"For the prime minister to be questioned by the police during a criminal investigation is unprecedented.
Plaid Cymru's Elfyn Llwyd, who also complained to police, said the questioning of Mr Blair was "for the lasting benefit of the democratic process" as it would force party funding to be cleaned-up.
But Scotland Yard's inquiry was dismissed by former Labour minister Frank Field as a "farcical waste of time and shows a real lack of judgement".
"A relationship between the giving of honours and the financing of political parties has been established over the centuries in this country and it would be surprising if it had stopped under this government," said Mr Field.
He said the original complaint by an SNP MP had just been a "wonderful wheeze" on which to peg a press release.
Liberal Democrat chief of staff Norman Lamb said: "Clearly this is a very serious matter, and it is important that the police are allowed to continue and conclude their investigations.
"Whatever the final outcome of the investigation, this sorry episode underlines the vital importance of reforming both the House of Lords and rules relating to party funding."
The Conservative Party has not issued a comment.