The Secretary of State is under increasing pressure to respond to claims that British Intelligence chiefs hampered police investigations into the Omagh bombing to protect the IRA ceasefire.
The last detective to investigate the largest single atrocity of the Troubles said vital evidence may have been held back from police for fear of endangering the ceasefire.
Chief Superintendent Norman Baxter alleged Downing Street was warned by republican contacts that to bring the Army into south Armagh to make arrests in the days after the bomb would destabilise the peace process.
Twenty-nine people and unborn twins were killed and hundreds injured when a bomb ripped through the centre of the Tyrone town on August 15, 1998.
Following Mr Baxter's claims, Theresa Villiers has been urged to detail what influence, if any, British intelligence officers exerted on the RUC officers investigating the atrocity.
"If information regarding the Omagh bombing was held back, or if the investigation was inhibited in any way for fear of destabilising the Northern Ireland political process, then that is an absolute scandal," said Ulster Unionist Party MLA Tom Elliott.
"We need the Secretary of State and the Chief Constable to confirm or deny the suggestion that evidence may have been held back."
SDLP MLA Joe Byrne said the allegations were "distressing for the families of all those affected", but added they strengthened the victims' relatives' campaign for a cross-body public inquiry into the authorities' handling of the case.
He said: "The victims of the Omagh atrocity need and deserve the truth about what happened and information about the gathering and sharing of intelligence material is vital.
"These new revelations make the case made by the Omagh families for an inquiry even more compelling. This inquiry should form part of dealing with the issue of the past which has been souring the political process.
"It is important not only for the families but to ensure that a similar tragedy can never happen again."
Mr Baxter claimed British Intelligence was contacted the day after the bombing by Sinn Fein members.
He said: "They advised them that if the green army, the British military, went into south Armagh to make arrests, the ceasefire would break. That was very strongly put."
Sinn Fein yesterday hit back saying: "Norman Baxter presided over a failed investigation into the Omagh bomb.
"Sinn Fein has and will continue to support the families in their quest for truth and justice."
The PSNI said it would be inappropriate to comment on an ongoing investigation.
"If information regarding the Omagh bombing was held back, or if the investigation was inhibited in any way for fear of destabilising the Northern Ireland political process, then that is an absolute scandal. We need the Secretary of State and the Chief Constable to confirm or deny the suggestion that evidence may have been held back."
Tom Elliott, UUP MLA