James Murdoch said it was only as result of civil actions that it became apparent that the practice of phone hacking extended beyond Clive Goodman and Glenn Mulcaire, who were jailed in 2007.
"At the end of 2010 the presentation of evidence that had not been in our possession previously from this civil litigation widened the circle definitively - or at least made it very apparent that this was very likely, that the circle was wider than the two individuals, Mr Goodman and Mr Mulcaire," he told MPs.
He said that he had been advised by the News of the World's then editor Colin Myler and chief lawyer Tom Crone to settle Gordon Taylor's claim for damages for having his phone hacked out of court.
"Their advice was that, in the absence of new evidence, this was simply a matter to do with events that had come to light in 2007 in the criminal trial before I was there, and that this was a matter in the past," he said. "The police had closed their case and said there was no new evidence."
James Murdoch rejected suggestions that the company had inserted confidentiality agreements into the out-of-court settlements with the victims of phone hacking in order to "buy their silence." He said he only learned that the phones of Milly Dowler and other victims of crime had been hacked when it was reported in the press earlier this month. "I can tell you it was a total shock," he said.
Asked about reports that News International journalists had tried to hack the phones of 9/11 victims in the United States, Rupert Murdoch said that they had "no evidence of that at all".
James Murdoch added: "Those are incredibly serious allegations and they have come to light very recently. We do not know the veracity of those allegations and are trying to understand precisely what they are.
"It is just appalling to think that anyone associated with one of our papers would have done something like that."
The Conservative MP Therese Coffey asked who decided that the News of the World should be shut down.
Mr Murdoch senior replied: "It was a result of a discussion between my son and I and senior executives and Ms Brooks one morning. We called the board of News Corporation, the whole board, to seek their agreement."
Pressed on whether it was a commercial decision, he replied: "Far from it."
Mr Murdoch senior was also asked how often he spoke to his newspaper editors. "Very seldom," he said. " I would ring the News of the World just to keep in touch. I ring the editor of The Sunday Times nearly every Saturday night."
He said he was careful not to be seen to be putting pressure on his editors.
Mr Murdoch said he had to deal with a "multitude of issues" every day, and admitted he may have "lost sight" of the News of the World.
"The News of the World, perhaps I lost sight of. Maybe because it was so small in the general frame of our company," he said.