Baroness Buscombe said lack of trust "seems to be contagious"
The exposure of MPs' expenses claims demonstrated the vital need to retain press freedom, according to the head of the Press Complaints Commission.
Baroness Buscombe said the media filled a "democratic deficit" and had a "right to feel proud" for exposing abuses of parliamentary allowances.
She said public mistrust in public institutions such as Parliament would be even greater without a free press.
Lady Buscombe said the coverage revealed "a dysfunctional democracy".
She said that, given the fact "the House of Commons appears almost entirely to have forgotten what they are there for... it is vital that the press is free to investigate and probe and tell it like it is".
Lady Buscombe, who took over as PCC chairman in April this year, told media representatives at an annual lecture in Stansted, Essex: "You can rightly feel proud that, from unravelling the government's misleading spinning of intelligence in the Iraq War to exposing uncensored details of MPs' expenses, the British press has filled the democratic deficit in recent years."
She said she recognised that some fellow Parliamentarians would not welcome her words, but MPs and peers had to "learn the right lesson" from the media coverage of their activities.
"If trust in politics is at a low ebb, it is because there has been too little freedom to shine a light on politicians' activities, not too much," she said.
"A lack of trust in our institutions seems to be contagious. Yet however sceptical the public may be about Parliament, the judiciary - even the media itself - think how much lower it would be without a free press."
Speaking on BBC Radio 4's Today programme, Lady Buscombe said there was a "dysfunctional democracy" involving a powerful political structure set against an opposition with few resources to hold members of parliament to account and properly scrutinise legislation.
"My concern is that so much legislation is going through Parliament and is not being properly scrutinised at the moment, so we need a free, a strong but a responsible press in order to tell it like it is and actually expose things that need to be exposed in relation to some of the policy that is being introduced," she said.
Lady Buscombe also criticised the use of so-called "super-injunctions".
These injunctions prevent reporting of both a story and the injunction itself.
Their use caused controversy last month when the Guardian said it had been prevented from reporting a question by Labour MP Paul Farrelly about an injunction obtained by oil company Trafigura and its lawyers.
She said super-injunctions are an "outrage" used as a tool by "the rich and the powerful".
"It's a denial of information that should be on the floor of the House of Commons," she said.