First Minister Peter Robinson has threatened to quit unless there is a judicial inquiry into the secret letters sent to 'on the run' paramilitary suspects.
Speaking to the BBC, the DUP leader said he wasn't prepared to remain in his role after being kept in the dark over the issue.
"I am not prepared to be kept in the dark by Her Majesty's government about matters relevant to Northern Ireland," he said.
Mr Robinson said: "I am not prepared to be the First Minister of a government that has found itself having salient facts relevant to matters that are devolved hidden from them.
"That is not acceptable to me.
"I want to have a full judicial inquiry into who knew what, when they knew it and exactly what they did know at the time.
"I also want to ensure that the letters that have been sent out are rescinded."
Meanwhile, David Cameron has condemned the actions that led to the collapse of the case against Hyde Park bombing suspect John Downey as a "dreadful mistake".
The Prime Minister said the letter giving Downey a false assurance that he was not wanted by British police over the IRA attack should never have been sent and a rapid factual review would be carried out to make sure "this cannot happen again".
Families of the victims of the bloody 1982 attack, in which four soldiers died, said they felt "devastatingly let down" by the decision.
Convicted IRA member Downey, 62, of County Donegal, had received a "letter of assurance" in 2007 when in fact there was an outstanding warrant against him.
Mr Cameron told MPs: "We should be absolutely clear. The man should never have received the letter that he received, Downey.
"It was a dreadful mistake and mistake that we now need to have a rapid factual review to make sure that this cannot happen again.
"But whatever happens we have to stick to the principle that we are a country and a government under the rule of law."
Mr Cameron said it was "absolutely shocking" that Downey was not going to be tried for the bombing.
He said: "I completely understand the depth of anger and concern that people will feel right across this country about the appalling events that happened in 1982 and the fact the person responsible is now not going to be appropriately tried.
"Of course, that is absolutely shocking and our first thought should be with those 11 soldiers and their families and their friends.
"It may have happened 32 years ago but anyone who has lost someone in a situation like that will mourn them today as if it happened yesterday."
Northern Ireland Secretary Theresa Villiers acknowledged the "very serious implications" that the collapse of the case could have on the stability and devolution of the country and said the Government did not support an amnesty for terrorists.
She told the Commons during Northern Ireland questions: "This Government does not support amnesties for terrorists and we oppose the legislation put forward by the previous government, which would have amounted to an effective amnesty."
Leader of the Democratic Unionist Party (DUP) in Westminster, Nigel Dodds warned of "outrage" sweeping the country, threatening to destabilise the region.
"The words of devastation from the families of the soldiers concerned in the Hyde Park bombing are an indictment of what is going on," he said.
"There is outrage right across the country, not just in Northern Ireland, but right across the country about this. How an official's letter can trump due process of law in this country.
"Will you realise how serious this is, not just for the process of law and order but for the very stability and continued existence of devolution in Northern Ireland where the Assembly has full responsibility for policing and justice, and on which these facts were held from the Justice Minister and the First Minister? This has very serious implications for devolution."
Ms Villiers replied: "I am very much aware of the very serious implications that this case has and they have also been conveyed to me by the First Minister, who I look forward to meeting to discuss this with this evening."