The government said on Thursday it would hold an inquiry into how a senior intelligence official left a file with top secret documents about Iraq and al Qaeda on a train.
A passenger found the orange folder, containing highly sensitive details about Iraq's security forces and the government's latest assessment of al Qaeda, on a London commuter service and handed it over to the BBC.
The two papers from the Joint Intelligence Committee had been with an unnamed official who worked in the Cabinet Office, the central government department that supports the work of Prime Minister Gordon Brown.
That official has now been suspended and Brown said it was "a very serious incident".
"We will have to trace where these documents have gone, if they have gone anywhere other than in an envelope to a local BBC station," he told reporters.
Cabinet Secretary Ed Miliband told parliament the loss was a "clear breach" of security rules and an inquiry into the breach would be held, headed by former senior civil servant Sir David Omand, who dealt with security matters at the Home Office.
Miliband said there was no evidence that Britain's national security had been compromised.
But the revelation is an embarrassment for Brown, who has already been stung by accusations of lax security after a civil servant lost computer discs containing the names, addresses and bank details of 25 million people in the mail last year.
In January, the Ministry of Defence reported it had lost a laptop containing personal data on 600,000 recruits.
Brown, whose popularity has plunged since he took over from Tony Blair last year, is promoting plans to roll out a national identity card system, and opponents of the measure often cite the government's poor record of keeping data secure.
The Conservatives said the latest incident highlighted "basic failures" in the government's ability to maintain security.
"This is just the latest in a long line of serious breaches of security involving either the loss of data, documents or government laptops," said the party's security spokesman, Baroness Pauline Neville-Jones.
The Cabinet Office said the official in question had the authorisation to take such files out of the office providing strict security guidelines were observed. But Miliband said the official had not sought proper approval.
Police officers from London's Counter Terrorism Command have begun an investigation into the incident while the Cabinet Office has launched its own internal inquiry.
