Jacqui Smith has been accused of "wilful ignorance" and of failing in her responsibilities as home secretary over the police raid on an MP's office.
The Tories say she should have asked more questions about the investigation, after Ms Smith said she was unaware Damian Green was about to be arrested.
Ex-home secretary John Reid expressed surprise she had not been told.
Ms Smith said that even if she had been informed, it would have been "wholly inappropriate" to intervene.
And in tense exchanges in the Commons, she asked her Conservative shadow Dominic Grieve to "remove his continued assertion that I am not telling the truth".
As the row between the two parties continues, health secretary Alan Johnson said later on Thursday that the police were entitled to investigate the leaking of Home Office information as what they were looking into was "clearly an alleged crime".
He told BBC's One Question Time programme that police officers were entitled to search Damian Green's Westminster office because MPs were not above the law and their offices not "sacrosanct".
"The police have to go where their inquiries lead them," he said.
As the home secretary spoke earlier, Speaker Michael Martin had to intervene to tell MPs to stop shouting at one point as Ms Smith made her statement on last Thursday's arrest of the Tories' immigration spokesman.
She said the police had been called in by the Cabinet Office, after a series of internal leak inquiries had not found the source.
She said it was not simply a matter that leaks were "politically embarrassing" but said they struck at the impartiality of the civil service.
It had been appropriate to call in the police faced with the apparent "systematic leaking of classified information over a sustained period" and "given the damage that this was doing to the effective conduct of government business".
Heavy-handed and incompetent at best, and at worst an unwarranted assault on our democracy
She told MPs there was considered a danger that "more information of greater sensitivity could potentially leak".
She said it was "sensible" that she had been informed that about the pending arrest of a Home Office official but she had not been told an MP was about to be arrested and would not have got involved if she had.
But she was attacked by shadow home secretary Dominic Grieve who said her position was "utterly flawed" and "implausible".
He demanded to know whether she had asked "any questions at all" about the police inquiry and to confirm she had not "the faintest idea" an MP was being investigated after the Home Office official's arrest.
He finished by saying: "Does the home secretary regret her wilful ignorance in this whole affair and the decision to wash her hands of the basic responsibilities that come with her office?
"Who is in charge of the police, if she isn't?"
Ms Smith accused him of being "cavalier" about the leaking of information from the Home Office - when he could be a future home secretary.
Her predecessor as home secretary, the Labour MP John Reid, said he had "no doubts at all about her integrity" and it was wrong for any MP to imply otherwise.
I was not arrested for counselling or procuring misconduct in a public office
But he added: "I have to say I'm surprised to say the least that she wasn't informed that her opposite number effectively was about to be arrested.
"I cannot think that if I had been told that this had been done after the event that I would have remained as placid as she has done in the circumstances."
Mr Grieve said the police action was "heavy-handed and incompetent at best, and at worst an unwarranted assault on our democracy".
He also accused the government of "smear and spin", saying the Tories took official secrets seriously and there was not "the slightest evidence" the arrest had anything to do with national security.
At one point during the debate the arrested MP Damian Green stood up holding a copy of his arrest warrant to correct the home secretary's description of what he had been arrested for.
"I was not arrested for counselling or procuring misconduct in a public office, she will understand the seriousness of her mistake and I would invite her to withdraw those words immediately," he said.
Ms Smith said she would take it up with the police, as she was reading from a publicly released statement made by them.
It is essential that other means of having checks and balances are there and the leaking of information has a long and honourable precedent
Speaker Michael Martin is under pressure after he admitted on Wednesday that police who raided Mr Green's office did not have a warrant.
Several MPs asked during the debate whether police had sought a warrant and if so, whether it had been refused.
A letter from Met assistant commissioner Bob Quick states a warrant was not sought as there was "no basis" to submit to a Justice of the Peace that it was believed consent to enter the premises would be refused.
For the Lib Dems, Chris Huhne said the leaking of information was justified in many circumstances, and called for new legislation to protect whistleblowers.
He said "formal procedures for holding the executive to account are so weak" they had been described as being "like heckling a steamroller".
"It is essential that other means of having checks and balances are there and the leaking of information has a long and honourable precedent."
Labour MP Sir Gerald Kaufman said the Tories had abolished the "public interest defence" for whistleblowers after Ministry of Defence official Clive Ponting was cleared for leaking information on the sinking of the Belgrano during the Falklands War.
But another Labour backbencher, David Winnick, warned that parliamentary democracy would be "undermined" if MPs were unable to carry out their duties "without fear or favour".
The Met Police said Mr Green was held on suspicion of conspiring to commit misconduct in public office. The MP denies any wrongdoing.
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