Tory MP John Whittingdale made his comments as the backlash continues following Lord Dyson's report over the BBC’s 1995 Panorama interview with Diana, Princess of Wales.
The report concluded the journalist Martin Bashir used “deceitful behaviour” to land his world exclusive interview and an internal BBC investigation had covered it up.
Answering an urgent question in the Commons, Mr Whittingdale claimed the report was “shameful” for the BBC.
He told MPs: “Lord Dyson’s report makes shocking reading. It details not just an appalling failure to uphold basic journalistic standards, but also an unwillingness to investigate complaints and to discover the truth.
“That these failures occurred at our national broadcaster is an even greater source of shame.
“The new leadership at the BBC deserves credit for setting up an independent inquiry and for accepting its findings in full, however the reputation of the BBC – its most precious asset – has been badly tarnished and it is right that the BBC board and wider leadership now consider urgently how confidence and trust in the corporation can be restored.
“It is not for the Government to interfere in editorial decisions, but it is the job of Government to ensure that there is a strong and robust system of governance at the BBC with effective external oversight.”
Lord Dyson had found Mr Bashir was in “serious breach” of the BBC’s producer guidelines after he faked bank statements and showed them to Diana’s brother Earl Spencer to gain access to the princess.
Mr Bashir had been cleared by internal inquiry in 1996, led by former director-general Lord Tony Hall, even though he had previously admitted lying about the fake documents he used in obtaining the interview.
Now Mr Whittingdale has urged the corporation to do better.
He said: “The BBC has been and should be a beacon, setting standards to which others can aspire.
”That it has fallen short so badly has damaged its reputation both here and across the world.
"The BBC now needs urgently to demonstrate that these failings have been addressed and that this can never happen again.”