London: Police bugged a Muslim MP twice in a counter-terrorism operation but did not break the law by doing so, Home Secretary Jacqui Smith said on Thursday.

In an emergency Commons statement, Smith said Sadiq Khan, Labour MP for Tooting, was "not the target" of the surveillance, which took place as he met terror suspect Barbar Ahmad in prison.

Smith confirmed the MP's conversations with Ahmad in May 2005 and June 2006 had been recorded. But she said senior Scotland Yard officers who approved the bugging in Woodhill prison had not known Khan was an MP. Junior officers were aware he was but "had no reason to regard this as significant".

Smith said an inquiry had found officers had not broken the law or the Wilson Doctrine, which bans security services from bugging MPs' phones. She admitted there was confusion in the law and announced a review of rules affecting confidential talks between MPs and constituents.

The US is seeking to extradite Ahmad on suspicion of running websites that raise funds for the Taliban, but he faces no charges in Britain.

The bugging of Khan, a government whip and former lawyer, emerged earlier this month.

Justice Secretary Jack Straw ordered an inquiry by chief surveillance commissioner Sir Christopher Rose, whose report was published yesterday.

Smith said: "Sir Christopher finds that none of the senior officers responsible for authorising this surveillance knew at the time that the Sadiq Khan listed as a friend [of Ahmad] was a Member of Parliament".

Five junior officers "knew that Mr Khan was a Member of Parliament, but they had no reason to regard this as significant".

However, the report reveals for the first time that Khan revealed in his taped conversation he was an MP and it "contains an express reference to him being an MP".

"It follows that those officers who monitored the visits and reviewed the detail of the product later had knowledge of that fact."

It raised fresh questions about the testimony of the junior officers. It pointed out that the men claimed that neither of them "knew until recently that Sadiq Khan was an MP".

Sir Christopher concluded that none of the bugging operations breached the Wilson Doctrine or the Regulation of Investigatory Powers Act 2000.

Smith told the Commons: "It is absolutely clear from Sir Christopher's report that [Mr Khan] was not the target of this surveillance".

Harold Wilson introduced the Wilson Doctrine in the Seventies in a bid to reassure MPs that security services were not monitoring their phone calls.