The meeting of the National Security Council comes as ISIS rebels in Iraq took the country’s biggest oil refinery and threatened to close in on Baghdad.
Ahead of the meeting the Prime Minister warned that creation of an “extreme Islamist regime” in the middle of Iraq.
He said that the militants of the Islamic State of Iraq and the Levant (ISIS) threatening the government in Baghdad were also plotting terror attacks on the UK.
The Prime Minister also claimed that up to 400 British citizens are fighting with the Islamist extremists.
While Britain supported efforts of Iraqi prime minister Nouri al-Maliki to tackle extremism in his country, he said that it was essential that the Iraqi government represented the interests of all the people and not just the Shia majority.
“I disagree with those people who those people who think this is nothing to do with us and if they want to have have some sort of extreme Islamist regime in the middle of Iraq, that won’t affect us. It will,” Mr Cameron told MPs at Prime Minister’s questions.
“The people in that regime - as well as trying to take territory - are also planning to attack us here at home in the United Kingdom.
“So the right answer is to be long-term, hard-headed, patient and intelligent with the interventions that we make.
“The most important intervention of all is to make sure that these governments are fully representative of the people who live in their countries, they close down the ungoverned space, and that they remove the support for the extremists.”
He spoke after Mr Miliband warned of the possibility that Iran could play a divisive role in the region.
The Labour leader said: “We support the announcement made yesterday by the Foreign Secretary to reopen the British embassy in Tehran and the dialogue started by the Foreign Secretary with his counterpart.
“But the challenge we face in Iraq is that although Iran opposes Isis, the Iranian regime in the past has shown that it does not support a vision for an inclusive and democratic state in Iraq.
“So can you give the House your current assessment of the willingness and intent of the current Iranian regime to play a constructive, rather than divisive, role in helping to resolve the Iraqi crisis?”
The Labour leader also urged the Prime Minister to speak to other countries in the region to make sure they were not fuelling the conflict.
The exchange came after the Iraqi government reportedly blamed Saudi Arabia for supporting ISIS which today seized control of three quarters of the territory of the Baiji refinery north of Baghdad after a morning of heavy fighting at gates defended by elite troops who have been under siege for a week.
A rapid advance saw ISIS fighters rout the government’s army and seize the main cities across the north of the country since last week.
The head of Iraq’s southern oil company, Dhiya Jaffar, said Exxon Mobil had conducted a major evacuation and BP had pulled out 20 percent of its staff. He criticised the moves, as the areas where oil is produced for export are mainly in the Shi’ite south and far from the fighting.