The revelation will create embarrassing questions for Tony Blair in the run-up to the publication of the report by Lord Hutton into the circumstances surrounding the death of Dr David Kelly, the government weapons expert.

A senior official admitted that MI6 had been at the heart of a campaign launched in the late 1990s to spread information about Saddam’s development of nerve agents and other weapons, but denied that it had planted misinformation. “There were things about Saddam’s regime and his weapons that the public needed to know,” said the official.

The admission followed claims by Scott Ritter, who led 14 inspection missions in Iraq, that MI6 had recruited him in 1997 to help with the propaganda effort. He described meetings where the senior officer and at least two other MI6 staff had discussed ways to manipulate intelligence material.

“The aim was to convince the public that Iraq was a far greater threat than it actually was,” Ritter said last week.

He said there was evidence that MI6 continued to use similar propaganda tactics up to the invasion of Iraq earlier this year. “Stories ran in the media about secret underground facilities in Iraq and ongoing programmes (to produce weapons of mass destruction),” said Ritter. “They were sourced to western intelligence and all of them were garbage.”

Kelly, himself a former United Nations weapons inspector and colleague of Ritter, might also have been used by MI6 to pass information to the media. “Kelly was a known and government-approved conduit with the media,” said Ritter.

Hutton’s report is expected to deliver a verdict next month on whether intelligence was misused in order to promote the case for going to war. Hutton heard evidence that Kelly was authorised by the Foreign Office to speak to journalists on Iraq. Kelly was in close touch with the “Rockingham cell”, a group of weapons experts that received MI6 intelligence.

Blair justified his backing for sanctions and for the invasion of Iraq on the grounds that intelligence reports showed Saddam was working to acquire chemical, biological and nuclear weapons. The use of MI6 as a “back channel” for promoting the government’s policies on Iraq was never discovered during the Hutton inquiry and is likely to cause considerable disquiet among MPs.

A key figure in Operation Mass Appeal was Sir Derek Plumbly, then director of the Middle East department at the Foreign Office and now Britain’s ambassador to Egypt. Plumbly worked closely with MI6 to help to promote Britain’s Middle East policy.

The campaign was judged to be having a successful effect on public opinion. MI6 passed on intelligence that Iraq was hiding weapons of mass destruction and rebuilding its arsenal.

Poland, India and South Africa were initially chosen as targets for the campaign because they were non-aligned UN countries not supporting the British and US position on sanctions. At the time, in 1997, Poland was also a member of the UN security council.

Ritter was a willing accomplice to the alleged propaganda effort when first approached by MI6’s station chief in New York. He obtained approval to co-operate from Richard Butler, then executive chairman of the UN Special Commission on Iraq Disarmament.

Ritter met MI6 to discuss Operation Mass Appeal at a lunch in London in June 1998 at which two men and a woman from MI6 were present. The Sunday Times is prevented by the Official Secrets Act from publishing their names.

Ritter had previously met the MI6 officer at Vauxhall Cross, the service’s London headquarters. He asked Ritter for information on Iraq that could be planted in newspapers in India, Poland and South Africa from where it would “feed back” to Britain and America.

Ritter opposed the Iraq war but this is the first time that he has named members of British intelligence as being involved in a propaganda campaign. He said he had decided to “name names” because he was frustrated at “an official cover-up” and the “misuse of intelligence”.

“What MI6 was determined to do by the selective use of intelligence was to give the impression that Saddam still had WMDs or was making them and thereby legitimise sanctions and military action against Iraq,” he said.

Recent reports suggest America has all but abandoned hopes of finding weapons of mass destruction in Iraq and that David Kay, head of the Iraq Survey Group, has resigned earlier than expected, frustrated that his resources have been diverted to tracking down insurgents.