Dhiren Barot, an Indian-origin man who plotted to use a radioactive 'dirty bomb' in London, was issued with nine British passports, Home Secretary John Reid admitted on Tuesday.
Seven of these were issued in his own name and two in false identities.
Thirty four-year-old Barot from Kingsbury, north-west London, was convicted last year of conspiring to murder a large number of civilians in the British capital by blowing up gas cylinders and detonating a dirty bomb. He is now serving a 40-year sentence.
A second terrorist, Salaheddine Benyaich, a Moroccan national currently serving 18 years in his home country for involvement in the Al Qaeda-inspired Casablanca bombings, also obtained his British passport fraudulently.
He obtained two British passports in the identity of a Brighton-born citizen -- something officials insist will not have happened had he been interviewed.
The astonishing development came as the Home Office was forced to admit up to 10,000 people had managed to obtain passports by deception in the past year.
Minister Joan Ryan said the Identity and Passport Service received 16,500 suspicious applications between October 2005 and September 2006 and although 'almost half' were stopped by existing safeguards, the remainder went undetected.
In a written statement in the House of Commons, Ryan said, 'Our current estimate is therefore the level of undetected fraud is about 0.5 per cent, equivalent to 10,000 applications against the planned 6.6 million passports issued per year.'
Also obtaining false passports are illegal immigrants and members of organised crime gangs. The scale of abuse was revealed as ministers published details of the new interview system for first-time passport applicants, which will begin in May. Under this system, new passport applicants will be required to attend a face-to-face interview.
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