Prime Minister David Cameron has ordered a new inquiry into allegations that a Scotland Yard police officer was part of an operation to "smear" the family of murdered teenager Stephen Lawrence, according to Downing Street.
A spokesman for the Prime Minister said he is "deeply concerned" about reports claiming a whistleblower took part in a spying operation targeting the family.
The claims were made by former undercover Metropolitan Police officer Peter Francis who alleges he was told to find 'dirt' that could be used against the family of the murdered teenager shortly after he was killed in a racist attack in April 1993.
Francis alleges that he was told to look in particular for evidence of drug dealing or political activism.
Mr Francis said he was also asked to target the friend who witnessed the murder and campaigners angry at the failure to bring his killers to justice.
A No 10 spokesman said this morning: "The Prime Minister is deeply concerned by reports that the police wanted to smear Stephen Lawrence's family and would like the Metropolitan police to investigate immediately."
The claims surfaced as a result of a joint investigation into undercover policing by the Guardian and Channel 4's Dispatches programme, to be broadcast tonight.
In response to the allegations Mr Lawrence's mother, Doreen, said: "Out of all the things I've found out over the years, this certainly has topped it."
She added: "Nothing can justify the whole thing about trying to discredit the family and people around us."
Mr Francis, who reportedly posed as an anti-racist activist in the mid-1990s, said he came under "huge and constant pressure" to "hunt for disinformation" to undermine those arguing for a better investigation into the murder.
He told a newspaper: "I had to get any information on what was happening in the Stephen Lawrence campaign.
"They wanted the campaign to stop. It was felt it was going to turn into an elephant.
"Throughout my deployment there was almost constant pressure on me personally to find out anything I could that would discredit these campaigns."
Scotland Yard said it must "balance the genuine public interest in these matters" with its duty to protect undercover officers.
Mr Lawrence, an aspiring architect, was stabbed to death by a group of up to six white youths in an unprovoked racist attack as he waited at a bus stop in Eltham, south east London, in April 1993.
In January 2012 Gary Dobson and David Norris were found guilty of being involved in the attack and sentenced to life imprisonment, after a forensic review of the case found significant new scientific evidence on clothing seized from their homes following the murder.
A Met Police spokesman said: "The claims in relation to Stephen Lawrence's family will bring particular upset to them and we share their concerns."
He added: "The Met must balance the genuine public interest in these matters with its duty to protect officers and former officers who have been deployed undercover, often in difficult and dangerous circumstances.
"We are therefore not prepared to confirm nor deny the identity of individuals alleged in the media to have been working undercover, nor confirm nor deny the deployment of individuals on specific operations.
"At some point it will fall upon this generation of police leaders to account for the activities of our predecessors, but for the moment we must focus on getting to the truth."
Jack Straw, who as then home secretary ordered the Macpherson report into Scotland Yard racism in the wake of the murder, said he would refer the allegations to the Independent Police Complaints Commission.
"I am absolutely appalled by these revelations. They go to the heart of the issue of the integrity and the ethics of the police service, or the lack of both, in part of the Metropolitan Police at the time of Stephen Lawrence's murder in 1993 and for some years after that," he told BBC Radio 4's Today.
"When I saw the Dispatches programme, or part of it, at the end of last week I said to the producer that I would be considering referring these allegations to the Independent Police Complaints Commission.
"Having thought about it further, and also noted that there has been no explicit denial from the Metropolitan Police, I am now going to refer this to the Independent Police Complaints Commission.
"These are really serious allegations. The IPCC have the resources to get to the bottom of what happened here and they have also got the powers to do so.
"I think they are the appropriate body to make this investigation."
Mr Straw said the allegations were "so serious and of a different order" to others about undercover officers that they should be the subject of a "full-scale" IPCC probe.
He said it was important to find out who ordered the activity and why "not a word of any of this was disclosed in any form, even confidentially, either to me as home secretary or to the Macpherson Inquiry".
There was only a "tiny" prospect of something similar happening today, he added, "but are they zero? No. And do we have to learn the lessons of the past? yes we do".
Home Secretary Theresa May is expected to make a statement on the claims in the House of Commons this afternoon.
Jenny Jones, deputy chair of the police and crime committee on the London Assembly, said: "The fact that senior police officers apparently withheld information from the Macpherson Inquiry is the last straw in this scandal.
"We have a unit that steals the identities of dead babies, withholds information from a judicial inquiry and uses sex as a tool to gain information from innocent women.
"It's just not credible to let the police investigate their own mistakes in this case.
"They have proved unwilling to be scrutinised and if we are to restore trust in the police there must be a public inquiry into the whole issue of undercover police spies.
"I should like to hear the Mayor of London, who is after all responsible for the Met, calling for a judge-led inquiry."