The DWP said claims had gone up as the recession had bitten
The amount of benefits overpaid due to errors by officials has doubled from £400m to £800m since 2000, say MPs.
Their report said that the figure was "far too high" and pointed out that underpayments due to officials' mistakes had also risen.
Overpayments due to fraud and mistakes by claimants fell in the same period.
The government said the recession meant more money was being paid out in benefits and the error rate was actually at its lowest since 2002-2003.
The report by the work and pensions select committee notes that the vast majority of decisions the department makes "are accepted by claimants and lead to the right benefits being paid on time to those who are eligible".
But it points out that while official figures out in November showed overpayments due to fraud were down, that "masked" the number which had risen, due to officials' mistakes.
"Although the department has made great strides in reducing fraud, this increase in error should be a cause for concern," the committee said.
It notes that in 2000-2001, £400m was overpaid due to official error. By 2008-2009 that had increased to £800m.
The amount of benefits being underpaid - due to mistakes by both staff and claimants - also increased from £800m in 2004-2005 to £1.2bn last year.
The report says "error champions" have been appointed at Jobcentre Plus and two sets of accuracy checks brought in at the pension, disability and carers service.
But it adds that the "cost of official error due to overpayments of benefits is still far too high" and had "risen significantly since 2000-1".
Committee chairman, the Labour MP Terry Rooney, said: "Poor decision-making not only costs the department in wasted over-payments but also generates more costs further down the line in reconsiderations and appeals.
"An increased focus on the quality of decision making to match the department's successful focus on fraud could have a very significant effect in reducing the cost to the Tribunals Service of hearings on benefit appeals."
But a spokesman for the DWP said more money was being paid out because of the recession and the rate of official errors - at 0.6% - was the lowest since 2002-3.
He said: "The vast majority of benefits are paid correctly to those who are entitled to them, but we are absolutely determined to fight both fraud and error in the benefits system.
"Official error overpayments are at their lowest level since 2002/2003 and this is in spite of a background of significantly increased workload during the economic downturn."
The committee urged the government to look at simplifying the benefits system to make it more understandable for claimants and staff.
It called for a "welfare commission" to be established to examine the existing system and look at "possible alternative structures".