Defence Secretary Des Browne has apologised for not blocking the sale of stories by sailors freed by Iran.
Mr Browne said the sale of stories had been allowed 'in good faith'
He told MPs he "profoundly regretted" the "mistake" and any damage done to the reputation of UK armed forces.
He announced an inquiry into the decision - and a separate probe into how the sailors came to be captured by Iran in the first place.
But Liam Fox, for the Tories, said Mr Browne had "humiliated" the UK and his position was "becoming untenable".
In his statement, Mr Browne said there had been "no apology and no deal" with Iran to secure the release of the 15 personnel.
'No witch hunt'
He said an inquiry into their capture, in the Shatt al Arab waterway, would be led by the Governor of Gibraltar, Lieutenant General Sir Rob Fulton, Royal Marines. This would take about six weeks.
It was important "Parliament gets the answer it deserves and, more importantly, learns lessons for the future", said Mr Browne.
A separate inquiry into the way the media was handled after the captives' return to the UK will be conducted by a senior military officer and a senior Ministry of Defence official, both unconnected with the decision, and would not be a "witch-hunt", he said.
Mr Browne, who is MP Kilmarnock and Loudoun, said the navy had allowed sale of stories "in good faith".
Responding to Mr Browne's statement, Mr Fox, the shadow defence secretary, said: "In a more honourable time in politics, the resignation of a secretary of state who had overseen such a humiliating fiasco on his watch would have been an inevitability."
He added: "Doesn't anyone in the government feel responsible for the national humiliation we have suffered at the hands of the pariah regime of Iran?"
Mr Fox also said: "The shambles surrounding the media handling is unforgivable."
Mr Browne said: "If he wants me to say sorry, then I'm happy to say sorry."
He added: "I don't accept that this operation was a humiliation for the Royal Navy....
"I have an important job to do and I intend to get on with it."
Liberal Democrat defence spokesman Nick Harvey said the defence secretary should be judged on the results of this inquiry into the crew's capture, rather than the sale of their stories.
He added: "It would not be right for him to resign his post over the media coverage of these events while the prime minister and cabinet who led us into the most disastrous foreign intervention in 50 years remain in post."
BBC political editor Nick Robinson said there was now "no chance" Mr Browne would have to resign.
He added: "Des Browne has proved that politicians can make mistakes and say sorry and still survive if they have few enemies waiting for them to fail."
Earlier, Tony Blair's spokesman said the prime minister had "full confidence" in the defence secretary.
The Royal Navy crew were on patrol boats in the Gulf on 23 March when they were detained by Iran's Revolutionary Guard.
The Iranians accused them of straying into its waters, but the British say they were in Iraqi territory.
After they were freed, the navy allowed some of the crew members to sell their stories - a decision criticised by families of servicemen and women killed in action, opposition politicians and former military leaders.
Mr Browne said he was not happy with the navy's decision to allow the sale, but believed at the time he was powerless to stop it.
He later said, with hindsight, that he "could have made a different decision" and accepted responsibility for what had happened.