The number of migrants entering the UK has been underestimated, say local authority leaders who fear it will mean public services will be hit.
In a letter to the Treasury seen by the BBC, four leaders say a new method to calculate migrant numbers is flawed and shows "perverse results".
The Office for National Statistics figures determine funding for councils.
Immigration Minister Liam Byrne said the government would try to keep a "closer track" of the situation.
The council leaders of Slough, Westminster, Kensington and Chelsea, and Hammersmith and Fulham say the "improved" method of calculating immigration, introduced last month, does not "remotely" represent the true picture on the ground.
The new figures suggest the London area is losing some 60,000 migrants to other parts of the country every month, they said
The leaders have written a joint letter to Treasury Minister John Healey, urging him not to use this information to calculate council funding.
Cllr Stephen Greenhalgh of Hammersmith and Fulham said his borough had seen a 550% increase in national insurance registrations by eastern European nationals.
Sir Simon Milton, leader of Westminster City Council, said he had "anecdotal evidence to suggest that over 2,000 migrants are coming through Victoria coach station on a weekly basis".
"We are so concerned about the use of these figures for vital council funding that we are lobbying the Treasury in addition to commissioning our own surveys," he said.
Richard Stokes, leader of Slough Borough Council, said poor migration statistics were already leading to severe underfunding.
"Estimates have failed to keep pace with what is happening on the ground and public services are suffering as a result," he said.
Slough's Labour MP Fiona McTaggart told BBC Radio 4's The World at One that the ONS had to be "more fleet of foot" in tracking the movement of migrants within the UK.
Merrick Cockell, leader of Kensington and Chelsea Council, said he believed his community would suffer as a result of what he called the flawed statistics.
Two thirds of local authorities across the country contacted by the BBC said they did not have faith in the official number of migrants in their area.
More than half said they would consider doing their own count to establish a more accurate picture.
Mr Byrne told the BBC the system for calculating the number of migrants arriving in the UK had been put in place by the ONS, which is independent of government.
He said a new group would be meeting for the first time in June to help keep a "closer track" of the issue.
Mr Byrne added: "We need to be upfront about listening to local authorities and local parts of NHS about whether there are impacts, so we can take that into account when we are making the decision about who we let in and who we don't."
But ONS demography director Peter Goldblatt defended its methods of calculating population increases:
He told the BBC: "I would want to distinguish between long-term migrants - that is people staying over a year - and short-term migrants. Our population estimates only include long-term migrants.
"We are doing separate work to estimate numbers of short-term migrants and we will be releasing figures, at least at a national level, later in the year."
The Department for Communities and Local Government said English councils had received above-inflation grant increases for 10 years, based on ONS statistics - "the best available".
A spokesman added that it would take advice from the ONS before the next spending settlement and would listen to the "competing views" of different councils.
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