"There is good reason for the expectation that relevant international criteria should be met before a proposal is agreed and cover sought - it is a sign of political will, institutional capacity, developmental commitment and good faith.
The International Development Select Committee report said the government had failed to consider the plight of the thousands of people - mainly Kurds - who will be displaced by the flooding caused by the dam's construction on the Tigris river.
The Foreign Office said the criticism was "unfounded", and insisted the human rights impact had been the subject of correspondence at both official and ministerial level.
However, the political repercussions for the region of displacing thousands of Kurds and cutting the flow of water into Syria and Iraq had also not been given proper consideration, the MPs said.
The Turkish government says the dam is vital for the generation power for urbanisation and industrial and commercial development.
Work on the seven-year long project in the south east of the country is due to begin at the end of the year.
Byers criticised
British engineering firm Balfour Beatty has a £200 million contract for the project, and has asked the Department of Trade and Industry's export credit guarantee department (ECGD) to underwrite it.
The committee criticised Trade Secretary Stephen Byers' suggestion in February that he was "minded" to grant the guarantee, subject to reassurances about resettlement and the environmental impact.
The MPs strongly indicated that, as far as they were concerned, indicating willingness to back a project before getting such guarantees was the wrong way round.
"There is good reason for the expectation that relevant international criteria should be met before a proposal is agreed and cover sought - it is a sign of political will, institutional capacity, developmental commitment and
good faith.
"The shotgun wedding approach to export credit that we find in the case of the Ilisu Dam does not in our view bode well for the implementation of commitments but is rather the worst form of export credit practice, " the report said.
But the Foreign Office insisted the UK would stand by its demands to the Turkish government for reassurances.
"It is because the government takes human rights so seriously that it will agree to provide export credit support for the project only if tough conditions are met," a spokesman said.
'Withdraw backing'
The MPs went on to insist that financial backing should not be given.
"The Ilisu Dam was from the outset conceived and planned in contravention of international standards, and it still does not comply.
"For that reason cover should not be given," they said.
'Rent-a-conscience'
The committee suggested that in the future all such projects should be referred to the Department for International Development (DFID) for consideration of the human rights impact.
But the committee was clear that the DFID should not become the "rent-a-conscience for the rest of Whitehall", and the MPs insisted that the Foreign Office and DTI, particularly the export credit department, should enshrine a commitment to human rights in all their work.
"We are astonished that the Foreign Office did not raise any questions about the proposed Ilisu Dam and its effect on the human rights of those living in the region.
The World Development Movement backed the select committee report.
Director Barry Coates said "today's report should deliver the fatal blow to this disastrous dam.
He added: "The ECGD must be reformed to ensure that public funds are used to support sustainable development and poverty reduction."