A Labour MP was bugged on two visits to see a constituent in prison, the home secretary has told the Commons.
Mr Khan, 37, is a government whip and the MP for Tooting
Jacqui Smith was relaying the findings of an inquiry into the recording of Sadiq Khan at a jail in Milton Keynes.
Senior police officers who ordered the recording of the conversations did not know who Mr Khan was, but five junior officers did, the report found.
And while it said there was no breach of protocol, the Tories said it still gave "considerable cause for concern".
The report, by chief surveillance commissioner Sir Christopher Rose, had been "turned around extremely rapidly - within just a couple of weeks", shadow attorney general Dominic Grieve said.
"During that time, he has managed to assess that routine bugging has not taken place."
"I do think that some members will find that astonishing in those timescales, to have achieved that."
Mr Grieve called for Ms Smith to consider "an inquiry into whether a much larger-scale bugging is indeed taking place".
Ms Smith told the Commons that "the monitoring was carried out lawfully under the legislation", as she set out Sir Christopher's findings.
"It was properly authorised and fully documented," she said. "Correct procedures were followed."
Ms Smith said that Mr Khan, the MP for Tooting in south London, was not a specific target of the surveillance operation.
The "Wilson doctrine" was not relevant in this case, Ms Smith said
"My Hon Friend was neither the target, nor should any suggestion stay that any suspicion rests over him," she said.
Sir Christopher's report confirmed that Mr Khan was secretly recorded when he met terror suspect Babar Ahmad on two separate occasions.
These took place at Woodhill Prison on 21 May 2005 and 24 June 2006.
The US is seeking to extradite Mr Ahmad on suspicion of running websites raising funds for the Taleban. Mr Khan has been campaigning for his release.
Details of the bugging first emerged in the Sunday Times, which alleged that a bugging device had been hidden inside a hollowed-out table in the jail's main visiting hall.
And an ex-police intelligence officer at the prison said he faced "sustained pressure" to bug Mr Khan.
MPs are not supposed to be bugged, according to the so-called "Wilson doctrine".
This was introduced in 1966 when Harold Wilson, prime minister at the time, feared MI5 might be monitoring politicians without permission.
He pledged no MP's phone would ever be bugged.
This was later widened to include all forms of communications and every subsequent prime minister has gone along with the doctrine - although Gordon Brown altered it last summer so it did not cover bugging authorised by police rather than the home secretary.
Sir Christopher's report stressed that the confidentiality of conversations between MPs and constituents should remain protected.
Ms Smith said "there should be absolutely no doubt about the vital importance of covert surveillance techniques".
And the ability to make use of such an "essential tool" should be preserved but "carefully regulated", she added.
She also announced a review of current codes of practice to make clear that any conversation between MPs and their constituents should be classed as confidential.